So. Bitcoin is down -40% from the November 10 High (and All Time High (ATH)) and once more the market is on full fear mode. This is not the first time we have come across a sell-off like this, in fact we can argue that such big pull-backs are a necessary process during a long-term bullish trend and have historically paved the way to even stronger and more aggressive parabolic rallies. On this urgent analysis, I focus on the weekly (1W) and daily (1D) time-frames, which I think most accurately grasp the current picture.
** The Weekly chart **
First and foremost in situations of such sharp sell-off like the current one, it is always best (and more accurate) to look at the bigger picture and time-frame, the 1W chart (chart on the left). Without the biases and news noise of the short-term charts, the weekly gives a more objective technical outlook to where the price stands. And for that cause, a great deal of help is provided by the 1W MA50 (blue trend-line). As you see BTC broke today that trend-line but has so far managed to rebound off the lows to some extent. This is not the first time the price behaves like that in 2021. During the previous major correction in May, the price also broke below the 1W MA50 on two occasions since late June but always managed to hold it and that provided the necessary support for the huge +100% rally of July - November. This indicates that as long as the weekly candle closes above or at least around the 1W MA50, BTCUSD has a legitimate probability of forming a Support there and start a new rally.
On this time-frame it is also interesting to check at an RSI fractal. As you see, I've numbered the mid-2019/ early 2020 sequence and compared it with that of early 2021/ today. The similarities are more than obvious in terms of 1W RSI, even though on actual price terms the 2019/2020 sequence was much more bearish. The key catalyst of course then was the March 2020 sell-off led by the massive global panic over the COVID pandemic outbreak that melted markets world-wide. On RSI terms that was leg (5). Right now this doesn't look to be as aggressive. The catalyst seems again to be the market fear over the new COVID Omicron variant. It remains to be seen if global markets are this time more resilient with better knowledge on how to deal with the situation than in 2020. If not, it is very much likely to see Bitcoin collapse more to the 30k - 28k zone.
** The Daily chart **
Besides the weekly, the daily time-frame can also provide very useful information on the current picture. The pattern since early August seems to be a Bullish Megaphone. What we should focus on right now is where the previous strong buy accumulation took place. That was from September 21 to 29. The price dropped below the 1D MA200 (orange trend-line), found Support just below the 0.786 Fibonacci retracement level from the previous High and when it broke again above the 1D MA200, it started the strong October rally.
Right now the price again broke below the 1D MA200 and the 0.786 Fibonacci level but only marginally and is so far rebounding. A repeat of this pattern should see Bitcoin form a support here for a few days and then rally to a new All Time High.
** Conclusion **
It can be argued that it is too early to assess the damage made and how low this can go. However, we need to keep a close eye to the weekly and daily parameters mentioned above as if BTC holds and closes above the 1W MA50 then there is a legitimate chance that next week the area around the 1D MA200 turns into the new buy accumulation zone for December and give way to a new aggressive rally.
How decisive do you think those parameters/ factors will be in shaping up the BTC market in the following days/ weeks? Do you think the 1W MA50 will hold and initiate a rally? Or will the pattern break and dive further to 30k? Feel free to share your work and let me know in the comments section!
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** The Weekly chart **
First and foremost in situations of such sharp sell-off like the current one, it is always best (and more accurate) to look at the bigger picture and time-frame, the 1W chart (chart on the left). Without the biases and news noise of the short-term charts, the weekly gives a more objective technical outlook to where the price stands. And for that cause, a great deal of help is provided by the 1W MA50 (blue trend-line). As you see BTC broke today that trend-line but has so far managed to rebound off the lows to some extent. This is not the first time the price behaves like that in 2021. During the previous major correction in May, the price also broke below the 1W MA50 on two occasions since late June but always managed to hold it and that provided the necessary support for the huge +100% rally of July - November. This indicates that as long as the weekly candle closes above or at least around the 1W MA50, BTCUSD has a legitimate probability of forming a Support there and start a new rally.
On this time-frame it is also interesting to check at an RSI fractal. As you see, I've numbered the mid-2019/ early 2020 sequence and compared it with that of early 2021/ today. The similarities are more than obvious in terms of 1W RSI, even though on actual price terms the 2019/2020 sequence was much more bearish. The key catalyst of course then was the March 2020 sell-off led by the massive global panic over the COVID pandemic outbreak that melted markets world-wide. On RSI terms that was leg (5). Right now this doesn't look to be as aggressive. The catalyst seems again to be the market fear over the new COVID Omicron variant. It remains to be seen if global markets are this time more resilient with better knowledge on how to deal with the situation than in 2020. If not, it is very much likely to see Bitcoin collapse more to the 30k - 28k zone.
** The Daily chart **
Besides the weekly, the daily time-frame can also provide very useful information on the current picture. The pattern since early August seems to be a Bullish Megaphone. What we should focus on right now is where the previous strong buy accumulation took place. That was from September 21 to 29. The price dropped below the 1D MA200 (orange trend-line), found Support just below the 0.786 Fibonacci retracement level from the previous High and when it broke again above the 1D MA200, it started the strong October rally.
Right now the price again broke below the 1D MA200 and the 0.786 Fibonacci level but only marginally and is so far rebounding. A repeat of this pattern should see Bitcoin form a support here for a few days and then rally to a new All Time High.
** Conclusion **
It can be argued that it is too early to assess the damage made and how low this can go. However, we need to keep a close eye to the weekly and daily parameters mentioned above as if BTC holds and closes above the 1W MA50 then there is a legitimate chance that next week the area around the 1D MA200 turns into the new buy accumulation zone for December and give way to a new aggressive rally.
How decisive do you think those parameters/ factors will be in shaping up the BTC market in the following days/ weeks? Do you think the 1W MA50 will hold and initiate a rally? Or will the pattern break and dive further to 30k? Feel free to share your work and let me know in the comments section!
--------------------------------------------------------------------------------------------------------
Please like, subscribe and share your ideas and charts with the community!
--------------------------------------------------------------------------------------------------------
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