After breaking down from an important uptrend last week, Bitcoin (BTC) mostly went sideways after its first leg down in what may be a new short term downtrend. It got a slight bump in the last 24 hours, and if that continues we could see a new downtrend stopped. All of this is occurring within the general shape of bear flag in the medium term chart.
Starting with the granular 4-hour chart to get a detailed picture, we see that last week’s dump was caught by strong support (we will return to this level later). During that dump, Bitcoin laid the first brick in a new short term downtrend, which remains likely unless it can break back into the lost structure from last week. And we can see that a small leg up is trying to do just that.
Price has rebounded up to the previous local downtrend line, the red band, and is stuck there at present. It has been contained precisely at the 0.5 Fibonacci retracement line – and here, the degree to which price carves back into this grid reflects its strength or lack thereof. Getting to at least 0.618-65 – better 0.786 – would be considered a retrace with some strength.
Although the volume profile broke on the bump (Bitstamp), it was still a very weak showing of buyers. Price has been contained now at the 55 exponential moving average (EMA, purple) after eventually climbing above the 21 EMA (orange), and we should watch for pressure buildup at this level.
Moving to the weekly to review the candle close, we see that last week’s close was pretty nondescript. A small body and smallish wicks, like the preceding week, show a lot of choppy price action which is virtually a no-trade-zone for typical swing traders.
We see the broad support and clear downtrend produce a descending triangle, a bearish formation. Volume is generally falling through this entire structure, and presages an eventual big movement in price. But we could see further chop within the remainder of the structure (in the blue triangle) before that movement.
Finally, looking at the monthly close, we notice heavy sell pressure both for August and July, indicated by long wicks on the top of the candles. Indeed, August and part of July were months of correction and retracement from the impressive Bitcoin runup during H1 2019.
This may imply some more downside, until we get a monthly close without such deep sell wicks. We can see that the 0.386 Fibonacci has been taken out, leaving us with the respectable 0.5 retrace target below, at $8,700. This would be a total retracement from Bitcoin’s local $14,000 top of about 37% – historically normal for Bitcoin retracements during a long uptrend. Indeed, from this distance, Bitcoin here looks like a giant bull flag.
The views and opinions expressed here do not reflect those of CryptoGlobe.com and do not constitute financial advice. Always do your own research.
