TL;DR it’s on.
It’s Friday, and bitcoin is at once again at a yearly low. Having touched $3,200 overnight, there was a slight rebound, but the volumes are low and that move downwards was decisive. There’s going to be more. Nothing is for certain in this game, but we’re pretty sure it’s going down further. Bitcoin dropped out of that down-sloping channel we’ve seen in recent days, and it dropped below its previous yearly low – albeit by only another $10, at least at this point…
Bitcoin did bounce off the $3,200 line, as we might very well expect: that’s not only the last support level, but it’s exactly on the 200 week moving average, which many conventional traders will be paying a lot of attention to. Bitcoin has rarely, if ever traded below this line. We knew this was coming: take a look at our recent article on Moving Averages. A lot of traders would have picked that spot to go long.
For what it’s worth, we believe the 200 WMA will represent a bargain in the future, and it may be a long time before we get those prices again once bitcoin lifts back above it. But for now, we think it’s highly likely it’s going down. BTC will test $3k, and if that doesn’t hold there’s a massive vacuum in support right down to… where? $2,200? $2,000? $1,800? We’ll find out when we get there but once $3k goes, we’re going to see a dramatic loss of confidence. And while that’s scary, it also spells Opportunity.
Price needs to head lower before the trend changes. The reason we can tell that is that we have not yet had the volume that would indicate capitulation. Volumes have dropped off from their rise a couple of weeks back. We need a convincing move, and despite price being at yearly lows, there’s not a lot of appetite from sellers or buyers yet. That will only come when the market makes its big move, and to us that means going below the 200 WMA – the unthinkable to so many – shattering confidence and inducing panic selling. Only then will price head low enough and hard enough to hit a point so attractive that traders FOMO back in. It will happen, just not above $3k.
Take a look at another recent article we wrote to prepare our readers for this day in the markets: A Study of Capitulation. Our price points will change as the market situation evolves but right now we’re looking for an easy win at $2,500 and then more aggressive bids at $2,250 and below $1,900, both just above tentative support levels. We should also say that – if the daily or weekly candles close below the 200 WMA – then that line is likely to become resistance, and it could be a while before we head back over it. It just depends how fast capitulation occurs.
This is not financial advice. But maybe a year ago you wished you could have bought at these prices. Now you can. But you’re probably scared and will pass up the opportunity.
And that’s why so few amateur traders make money. It’s why the rich get richer. It’s why assets are concentrated in the hands of the few during a bear market, who sell to the many when the price is rising.
Make the most of this opportunity, people. Make a plan and act on it. Good luck.
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