June, like May and April before it, has been an excellent month for Bitcoin (BTC) holders. Few analysts predicted or imagined that Bitcoin would run so hard, so fast, and so close to its all-time-high price of $20,000.
But this week’s candle close suggests that a period of correction may finally be at hand. We will look at the weekly and monthly closes, as well as Bitcoin’s longer price history, to try and evaluate the possibilities of what could happen if Bitcoin corrects.
Looking first at the weekly candle close, we can see that this candle looks clearly and generally bearish. It strongly resembles a bearish “shooting star” candle pattern, and would typically signal a period of correction.
Last night, just before the close, bears drove the price down under a key support/resistance (S/R) zone, flipping it to resistance. It is difficult to say how damaging this is, however, as it was a minor miracle to surpass this resistance zone to begin with.
What’s more, Bitcoin recently signalled an equally bearish weekly close, at the end of May with a “doji” close. But at that time, the leading crypto was heavily bought up just when it seemed to be on a course for a major correction down into the $7k or even $6k blocks.
Another noteworthy takeaway from the weekly close is found on the Histogram indicator. This week actually closed slightly higher than the previous weekly peak: 610 versus 607 (pictured). Although not pictured, RSI on the weekly has also remained basically as strong.
Moving briefly to the monthly, the obvious thing to note is five consecutive months of gains. The June candle certainly looks less powerful than the May candle, and has closed out within a clear zone of resistance. Five consecutive months of green is not record-setting, but it isn’t far off: July is thus a good candidate for a corrective month.
How Much Correction?
If Bitcoin does enter a corrective period, how far might it go down? Three tools might help us guesstimate the retrace.
The first is the 21 weekly EMA. During the entirety of the last bull market, from late 2015 to late 2017, the weekly price action never closed below this level.
If Bitcoin corrects now; and if Bitcoin is in a new bull market as many have surmised, we would look for a bounce at the current 21 EMA level. This would be welcomed as a confirmation of a new long term uptrend. Just casually guestimating by the chart, this would likely intersect with price at roughly $8,000 in the green box (pictured.
The second of our tools is a Fibonacci retracement grid, drawn from the swing low to the local high (pictured). We see that the 21 EMA will soon fall right within the 0.618 and 0.5 range – a healthy but not disastrous retracement.
The previous bull cycle had 8 major pullbacks.
On average, each pull back:
— Matt Kaye 🧐 (@MattDavidKaye) June 27, 2019
Price retracing to $8,000, in this box, would be about 42% down from the local top – which range is consistent with bull market retracements for Bitcoin.
Finally, we go to the 100 day simple moving average (SMA). Like the 21 weekly EMA, the 100 SMA has been shown to hold Bitcoin retracements during uptrends.
We see that, during the previous bull market, price was largely held at the 100 SMA with only some brief capitulations below it.
On the present chart, this 100 SMA line currently sits at $6,994. But this average is definitely uptrending, meaning any retracing price will meet it higher – perhaps around $8,000?
Ultimately, Bitcoin remains extremely bullish until proven otherwise. There is no reason whatsoever to worry about the long term uptrend, until Bitcoin breaks the 21 EMA, the 100 SMA, breaks $8k and then $7k, then lower. Given the astonishing price action we have seen in these past three months, we should no longer doubt what Bitcoin is capable of.
The views and opinions expressed here do not reflect those of CryptoGlobe.com and do not constitute financial advice. Always do your own research.