Yesterday, Bitcoin (BTC) capitulated from its second big consolidation pattern within the last month or so, putting a second leg on the downtrend that began on roughy September 24. And with two legs put in, it is reasonable to start asking where the bottom of this downtrend may land. Today, we’ll establish where support may come in, and look at the long term indicators to get a sense of the trend.
We first look at the weekly chart, and perhaps the most important thing to note is the EMAs pointing down with force. The 8 has crossed under the 21, and things are starting to look a bit scary as if an even longer downtrend is settling in.
The 55 EMA had held strong for four weeks, marking the bottom of the local market, but has now given up the ghost. Regaining this level before the week’s close would be an ultra-bullish miracle, but we shouldn’t count on it. The histogram had been looking pretty nice, flattening out and looking ready to start arching back up; but here too, the bullish narrative has been thrashed.
On another weekly chart, with a full EMA ‘fan’ (above), we see that the bullish fan that formed (smallest on top) and fully stacked in June of this year is starting to collapse on itself. The 13 is ready to join the 8 in crossing under the 21. Generally, when this fan gets fully stacked in one way or another, it means an extended trend in whichever direction the fan is pointing.
Turning to the daily chart, we find that the first major support on the chart is from May-June of this year, at around $7,500. Indeed, this is precisely the support block currently holding Bitcoin. This support basically extends all the way down to $7k, and is our first best hope for forming a consolidation area at this price range.
We can also note that yesterday’s drop was nowhere near that of September 24 (Bitfinex). We might view this as an easing in selling pressure -- but of course that narrative will change if we have more downside.
On the 3-day chart, we see that price has been held at a low of $7,333 on Bitfinex, which is exactly where the ‘golden pocket’ Fibonacci area begins. Between the golden pocket and strong support, price has a good chance of holding here, at least for a while.
If price doesn’t hold above $7k, however, there is almost no market history in 2019 to form a support base that we can identify. For that, we have to go back to 2018, and we should see support come in at about $6,750 (easily identified using the Volume Profile indicator).
Overall, in the long term, we definitely need to be concerned about an even more extended downtrend. However, there is still time within the week to stabilize the situation -- pushing the histogram back up, or even retaking the 55 EMA is still in the cards. Closing the week anywhere above $7k would seem manageable for avoiding the start of an even more serious downtrend.
The views and opinions expressed here do not reflect those of CryptoGlobe.com and do not constitute financial advice. Always do your own research.
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