Bitcoin Retrace Held at Key Levels, Overall Consolidation After $12k Rejection - Price Analysis

  • Short term: oversold conditions might provide a trade opportunity on a bounce
  • Long term: uptrend still very much intact

Bitcoin (BTC) is continuing to downtrend at a slightly alarming rate, after being rejected hard and consistently at $12,000 in what could perhaps be considered a false breakout. On a larger timeframe, however, price action is consistent with a larger consolidation - and as long as price respects some key levels, the long term Bitcoin uptrend is still on track to hold.

Starting with the 12-hour chart (Bitstamp), we get a view of the recent rejection. We can see that Bitcoin was poised to break out of a huge downtrending channel last week, but sellers refused to allow the leading crypto to reside above $12,000 at all. After a few days of battle in this sub-$12k zone, buyers relented.

Holding here is idealBTC chart by Trading View

Encouragingly, we see that Bitcoin’s decline has been stopped cold at the important 55-day exponential moving average (EMA, purple). The zone surrounding $10,600, the key inflection area of the present market structure, is currently holding Bitcoin’s decline. Holding here would be ideal.

So things are not quite serious yet. If we do not hold here, the next level below is properly $10,000 and the area surrounding it; down to $9,600 is really a must-hold area, and would still count as a higher low in the local structure. If this area is lost, we are at risk of seeing Bitcoin complete another leg in this downtrending channel, leading to sub-$8,000 prices.

Very oversold picture here -- trade opportunityBTC chart by Trading View

Looking at the 4-hour indicators, we see that the RSI is already quite oversold. Based on this, we might hope for some buying relief soon. The histogram is faintly starting to curl up and around, but the MACD is still fanned out toward the downside where we would prefer to see some contraction by now.

Zooming far out to the weekly chart, however, we can see that things still look very much under control. Contracting volume since late June generally suggests consolidation, as does a generally contracting price profile. The volume during these first three days of the week has actually been pretty meager, despite the sharp selloff.

Overall uptrend and consolidationBTC chart by Trading View

Overall, if Bitcoin can hold its current level, or at worst the $10,000 zone, we don’t have anything to worry about in terms of damage to an overall uptrend. If and when BTC breaks those levels, only then do we start dusting off Bitcoin’s longer price history to search for potential support zones lower on the chart. We aren’t there yet.

The views and opinions expressed here do not reflect those of and do not constitute financial advice. Always do your own research.