The is still playing out from my previous post with a stunted 38.2 fib retracement to print the right shoulder, although I still expect another wave up to complete it. The downward sloping flag from my previous post seems to have turned into a right-angled as we found support at the same level as 13 Jan. Yesterday's drop happened as expected on account of that divergence on the 4H StochRSI, as well as our daily SMA50 resistance.
Although we never dropped as far as our $3440 support, we still fell relatively close, with a roughly $100 drop to $3480 (the same support we found on 13 Jan). This shows we still have strong support around the $3500 mark in the short term and that the bulls haven't handed the reigns over to the bears just yet, although they're quite close to doing so once this right-angled breaks out to the downside.
We also have a downward cross of the weekly StochRSI so looking to retest that weekly SMA200 and potentially our $3k round number support, which I expect to be immense.
For the short term, the $3500 support is holding well. We're oversold and we have hidden on the 3 hour StochRSI so I suspect we'll have another wave up to our resistance somewhere between $3870 and $3940 before we drop back below the SMA50 again. This will be more than a 61.8 fib retracement after our fall from $4100 and should complete the right shoulder of the in my previous post, giving us a $3089 fib extension target, which coincides with the our target.
Once we breakdown from the , I suspect the weekly SMA200 is going to initially hold at around $3300 where we should see a bounce to retest the as resistance, before dropping through our weekly SMA200 to find our targets.
The question, is whether or not we are going to have a full weekly candle close below the weekly SMA200 (which has never happened and we don't want to start seeing that weekly SMA200 as resistance), or whether it holds or we have a strong wick below it before we close back above it. Either way, our $3k support and our weekly SMA200 are the key support levels which could keep us in a range bound market for the next few months if they prove to be too strong at this stage.
The way I see it, we either get capitulation in the next few weeks or we remain range-bound for months to come. If we do get capitulation after the breakdown and a drop below our weekly SMA200, then I'm expecting it to be a quick pukey drop, first to our target then towards our bottom, before we have a strong bounce back above our $3k support to test our weekly SMA200 once we hit those levels. This is where we'll determine whether we have a weekly candle close above the weekly SMA200 or below it. Otherwise we find support above $3k and head back up towards $4200.