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Bitcoin: A Break to $7.2k Soon is in the Cards

BITFINEX:BTCUSD   Bitcoin / U.S. Dollar
As you can see in the chart preview that I have for this idea, my R/R is showing a jump all the way up back into the $7k's from where we are.

I'll explain why below:


From the picture above, you can see that the bulls have once again defended this critical support zone and the price is now being sent in the opposite direction.

Now, even though $6.5k has served as the major overhead resistance (as we’ve identified in previous price articles), it’s worth mentioning that another major resistance/support point was $6.2k-$6.3k.

Looks like the price has broken through to test that $6.5k mark. Now, it is consolidating back to that $6.2k-$6.3k mark before getting ready to attempt to break through the $6.5k mark once more.


As you probably guessed from what I wrote on the picture above, this is perfectly fine.

I had to reduce the chart time frame down to the H4 in order to make the point that I was making a bit more visible for everyone (just to be clear).

Relative Strength Index(14)


So, as you can see in the chart above, the RSI is nearly in the oversold area. This is positive.

“Did you say positive?”

Yes, because the RSI was just overbought (remember we are in a bear market, so overbought = teetering soon), thus this leads to a short-term consolidation if the price action is still, overall, going to move upward on the daily.

However, if the above scenario depicted is/was not the case, then the price would be ready to fall back down through the floor.

Once again, remember that we are in a traded range, so if the price does break above $6.5k, then it has the potential to really start going stupid.

Looking at Short Positions on Bitfinex

This information is going to tell us a lot about what’s going on and what could happen.


Shorts are still illogically overextended in their positions at the moment.

That’s just a fact. A 100% gain in shorts and the only minor drop-off of short positions toward the end of this chart here signals that those that are bearish on $BTC #Bitcoin, are beginning to ignore all warning signs.


Perhaps what should be even more alarming to short trader is the fact that the # of shorts on Bitcoin is nearly at an all-time high.

Also, a substantial sum of shorts that were placed on Bitcoin were placed when the price was in the traded range($6k-$6.5k), so the risk of cascading liquidations if the price shoots out from underneath them and suddenly is testing $6.8k-$7.2k (hypothetically), is strong.


And if the price does break through the overhead resistance, this is the most likely consequence for those short positions.

Therefore, the short-sighted attempt to short the currency at this point is not only dangerous but non-worthwhile from a R/R perspective.

Smart money more than likely shorted this coin from $8k+ or the high 7’s and probably closed their position when the price failed to dip below $6k sufficiently (which would account for why the price bounced back up).

Now, let’s check out the RSI (14) on the daily to ensure that that’s still healthy (for bulls).

And if the price does break through the overhead resistance, this is the most likely consequence for those short positions.

Therefore, the short-sighted attempt to short the currency at this point is not only dangerous but non-worthwhile from a R/R perspective.

Smart money more than likely shorted this coin from $8k+ or the high 7’s and probably closed their position when the price failed to dip below $6k sufficiently (which would account for why the price bounced back up).

Now, let’s check out the RSI (14) on the daily to ensure that that’s still healthy (for bulls).


The answer is yes (above is the daily RSI ).

Conclusion

This should be considered hidden divergence when accounting for the fact that the price still hasn’t even jumped outside of this traded range while the RSI has been rising the entire time.

Thus, there is still a serious potential for the price to break upward.





Comments

BTC seems to bounce as largely expected of people that 58XX zone will do the magic. I saw a great analysis on the log scale showing exact price action on a re-test of major level. It worth looking at. If this is correct then BTC will be on with a great moves.


Potential wave pattern can be follow from this chart



BTC in recovery mode, let see how far this will last. It has some nice pattern.
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My opinion:
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Agreed!
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Good analysis, thanks for sharing
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