After looking like it might break market structure and begin a new uptrend, Bitcoin (BTC) was rejected around $12,000 last night (August 6) and sent back down for what is likely to be more consolidation.
The final indication of a rejection, for now at least, came with yesterday’s daily candle close, which was rejected with intense selling soon after breaching $12,000 and closed below the mark. The market had no interest in supporting a breakout at this time - a breakout which would have been a complete departure from a falling parallel channel market structure.
For now, a line of support has formed at around $11,450. Zooming way into the 2-hour, we see that the 55 exponential moving average (EMA) level has held Bitcoin’s price action on the bottom side, so we may watch this level in the coming days.
Volume is rapidly consolidating here, suggesting a movement soon. It is possible that the formation just under $12,000 is something like a bull flag, and a further break up will actually crack the aforementioned structure.
Looking at the 4-hour chart and indicators, which are generally reliable for discerning swing trades, we look at the possibility of a bull flag.
With volume looking to break out soon, we can consider this scenario. The RSI has stabilized after the rejection, and the histogram has flattened out and may even tick up when this candle closes. The MACD averages, after crossing down, are also starting to curl back up suggesting renewed strength. If nothing else, the market has not yet ruled out this possibility.
On the other hand, if we lose this level just under $12,000 - and lose the chance for a breakout back above - we must then consider expectations for the inevitable downside action.
There are several levels in this pattern that could catch a Bitcoin retracement from $12k, and prevent it from falling all the way back to the very bottom of the channel - at $7,600.
The $10,600 level has been very important in the local market structure, and is a good bet that buyers will show up here. What’s more, this zone intersects with the 66 EMA - a very critical average on the 12-hour chart during 2019 - and a diagonal support level.
Retracing to and holding $10,600 would be very positive for Bitcoin, as it would be a higher low in the local structure and signal a possible base for another attempt at $12k. Losing this level, however, would be rather negative and would probably result in the third retest of the support zone around $9,300. At least holding $10,000 would be a better result.
With volume looking to break soon, we should know soon which direction BTC will head next.
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