TL;DR a bullish bounce but the overall picture needs to change for new highs.
Bitcoin has proven massively volatile in recent days, with thousand-dollar-plus moves becoming commonplace. While the 50 DMA acted as support on Monday, it was breached on Tuesday, and bitcoin fell to the $9k region. For a while, it looked as if our downside targets in the $8k area would come into play – with BTC potentially falling as low as the 100 DMA around $8,000 itself.
Instead, bitcoin bounced off support at $9k, where bitcoin had consolidated back in May and June. Then it scythed back up through the 50 DMA at $10k like a hot, well, scythe, through butter. This all appeared very bullish: a strong recovery from a well-established support zone.
However, right at this point the next move is unclear. Here’s why.
At the time of writing, bitcoin is trading at $10,300, having topped out a little higher at $10,777. This is a key resistance zone and also the 38% fib level, measured from the $13,880 top to the recent bottom at $9,050 (Bitstamp). Bitcoin has apparently stalled, and there are now two options.
1) Push higher, breaking through this ceiling and consolidating above at least $11,200. If this happens, there’s a good chance we’ll see bitcoin move higher and potentially challenge the $14k area again.
2) Fall back, at which point we’re looking at further downside action and a drop below $9k, into our target region close to $8,000.
For the last month, bitcoin has been trading in a broad, downward-sloping channel, with lower highs and lower lows. The bottom of that channel is around $9k, where BTC dropped to a couple of days back. The top is now around $12,800.
Those two numbers, $9,000 and $12,800, are currently the ones to watch. For swing traders, this channel could represent an attractive play – there are potential 40% profits between bottom and top. But a breakout can and will occur soon.
If a downside break doesn’t occur within the next few days, the 100 DMA will rise into the channel, providing further support. Bull markets often pull back to the 100 average, and there’s no reason why this one should be different. That may be another signal for a long entry – but as ever, this is not trading or investment advice.
Red hot news, scorching wit and searing opinion pieces from Crypto Inferno.
Join us on
Our crypto-chat: https://t.me/hellabovecrypto