Bitcoin has made its expected correction and bounced hard.
It was bound to happen, and it’s best to get it out of the way. We knew bitcoin had to retrace – the question was always how much.
In the event, it turned out that the crash sent it almost $2,000 lower. The final leg of that was a drop of $1,000 and a bounce from support right back up to where it started – all within the space of 30 minutes. The resulting doji candle was impressive, and price has stabilised in the $7,200 -7,300 region for now.
So, what next, now that the parabolic trendline has failed? We would expect a period of consolidation here, though of course another fall is not off the cards. The market has tested $6,200, which is right within the old support region from 2018. It may test it again, in which case we’ll be looking carefully at volumes (the last doji was on high volume, which is reason for confidence) and whether bitcoin puts in a lower low or a higher one this time.
If it breaks $6k, we might see a drop to $4,600 or even $5,000, where support lies. $4,200 would be support below that, but that would erase all the gains of April and May. To the upside, we now have $8k as resistance, and then a shot at $9-10k. It now looks like that may take some time as the heat has dissipated for now.
Zooming out to the weekly, bitcoin is still well above all the major moving averages, though it briefly dipped below the 50 WMA earlier today. The daily candle will be interesting; currently it is a red candle with a long wick down, and should it also close as a doji – price rising to perhaps $7,600 or $7,800 before midnight – we would consider that very bullish. In short, sellers didn’t have the confidence to keep going, and there were lots of buyers willing to pick up bargains below $7k.
We’re likely in for continued volatility, but for now, RSI no longer shows oversold on the higher timeframes and the demand for BTC was encouraging. The uptrend is still in force.
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