Bitcoin at a critical support area; next support at $2.6k
Hi all,
Thanks for taking the time to read this analysis.
My last update I discussed the possibility for a breakout based on what the indicators were telling us. However, the bulls were not strong enough to break the descending trend line (dotted line) as the price was getting tightly wedged between that resistance and the 89EMA support (in green). As soon as this 89EMA broke, it became obvious that we would see a rapid selloff. This is exactly why I made it clear I would only buy on a breakout of that descending dotted trend line, because trading during this tight consolidation period is equivalent to gambling.
Now that Bitcoin made its direction quite clear, we need to keep our eye on all potential support zones.
Right now the price is sitting on top of a very solid support zone (S1).
- The ascending blue line has been drawn from the $200 price point back in Aug 2015 onwards and has multiple support touches from candle wicks (without ever breaking below). I have much more confidence in this log trend line than the one drawn on the Bitstamp chart as BraveNewCoin Liquid Index is a much more reliable indicator of Bitcoin’s true price based on the prices of the largest Bitcoin markets in the world.
- Price is now in the range of the 0.786 fib level. This Fibonacci retracement is drawn from the all-time high all the way down to $0.00.
- The volume profile also shows this zone historically has a lot of trading activity, and could provide a chance for buyers to step in.
If this S1 support breaks, there is a high chance for the price to begin a freefall from that point on which will probably show aggressive selling much more violent than the current selloff.
The next support range will be somewhere around the 200MA (in orange) or as low as $2,600. This is the S2 range on the chart above. The volume profile shows this area to be another zone of high trading activity. I’d also like to point out that historically, the price of Bitcoin has never fallen below the 200MA except for the brief candle wicks back in 2015, but always popped back up above this. Of course this might not mean anything, but it’s something I’ll keep in mind if the price does break the S1.
Finally the last support (S3) is around the $1,100 to $1,200 price range. This support is only based on volume profile but also if you turn log scale off you can see this zone is just about where Bitcoin began its phenomenal bull run in early 2017.
All in all, right now we are at a critical point if we ever expect Bitcoin to maintain these current prices. Keep an eye on bullish divergences on the daily time frame as well as any other reversal signals before jumping into a long order. As attractive as these price are right now, we must keep in mind fundamental analysis and realize that the sentiment in this market is not very positive. With that said, if S1 breaks then it is very likely the price will fall to S2 or S3 fairly quickly. However if the price can maintain above this blue trend line and slowly move upwards in the weeks to come, it should bring back a lot of confidence in the buyers to get back in.
Thanks for reading this analysis, and please give it a thumbs up if you found it useful!
Thanks for taking the time to read this analysis.
My last update I discussed the possibility for a breakout based on what the indicators were telling us. However, the bulls were not strong enough to break the descending trend line (dotted line) as the price was getting tightly wedged between that resistance and the 89EMA support (in green). As soon as this 89EMA broke, it became obvious that we would see a rapid selloff. This is exactly why I made it clear I would only buy on a breakout of that descending dotted trend line, because trading during this tight consolidation period is equivalent to gambling.
Now that Bitcoin made its direction quite clear, we need to keep our eye on all potential support zones.
Right now the price is sitting on top of a very solid support zone (S1).
- The ascending blue line has been drawn from the $200 price point back in Aug 2015 onwards and has multiple support touches from candle wicks (without ever breaking below). I have much more confidence in this log trend line than the one drawn on the Bitstamp chart as BraveNewCoin Liquid Index is a much more reliable indicator of Bitcoin’s true price based on the prices of the largest Bitcoin markets in the world.
- Price is now in the range of the 0.786 fib level. This Fibonacci retracement is drawn from the all-time high all the way down to $0.00.
- The volume profile also shows this zone historically has a lot of trading activity, and could provide a chance for buyers to step in.
If this S1 support breaks, there is a high chance for the price to begin a freefall from that point on which will probably show aggressive selling much more violent than the current selloff.
The next support range will be somewhere around the 200MA (in orange) or as low as $2,600. This is the S2 range on the chart above. The volume profile shows this area to be another zone of high trading activity. I’d also like to point out that historically, the price of Bitcoin has never fallen below the 200MA except for the brief candle wicks back in 2015, but always popped back up above this. Of course this might not mean anything, but it’s something I’ll keep in mind if the price does break the S1.
Finally the last support (S3) is around the $1,100 to $1,200 price range. This support is only based on volume profile but also if you turn log scale off you can see this zone is just about where Bitcoin began its phenomenal bull run in early 2017.
All in all, right now we are at a critical point if we ever expect Bitcoin to maintain these current prices. Keep an eye on bullish divergences on the daily time frame as well as any other reversal signals before jumping into a long order. As attractive as these price are right now, we must keep in mind fundamental analysis and realize that the sentiment in this market is not very positive. With that said, if S1 breaks then it is very likely the price will fall to S2 or S3 fairly quickly. However if the price can maintain above this blue trend line and slowly move upwards in the weeks to come, it should bring back a lot of confidence in the buyers to get back in.
Thanks for reading this analysis, and please give it a thumbs up if you found it useful!
Now we are starting to see some reversal signals on the 4-hour time frame and even the 6-hour time frame with bullish divergences showing up.
Please see my latest idea: