Last week ended with a bang – again. This one could shape up to be something special. One thing’s for sure: it’s going to be volatile.
Bitcoin is taking another breather after pushing upwards to another yearly high on Monday – $8,939 on Bitstamp. Right now it’s trading around $200 lower than that, which represents an entirely reasonable pullback after the $900 move we saw on Sunday night and the early hours of Monday morning.
And so we’re back where we have been many times already over the last couple of months. Bitcoin has put in a gravity-defying leap higher, and is consequently overbought . Daily RSI has spent most of the last two months above 70, the weekly is currently at 79, and while the lower timeframes are coming back down from overbought now, they have almost run out of room to go higher at times.
In short, a pullback is absolutely to be expected. And yet, we’ve been here many times already and exactly the opposite has happened. Despite being massively overbought, profit-takers have not proven equal to new buyers.
Now at some point – some point – the situation must change. Bitcoin must correct sooner or later, even if it’s after putting in a new all-time high (though we’re fairly sure it will happen long before that). But bitcoin keeps confounding traders and conventional wisdom by shrugging off the technicals and putting in another leg up.
What are the key areas to watch for now? Obviously we are close to $9k. The $9-10k zone is a natural target, with the round number acting like a magnet, as well as this already being an established resistance zone. If we do not get a pullback before breaking $10k, it will be truly remarkable. And once $10k is gone, there is comparatively little resistance at all – some at $12k, but then practically nothing to $20k (and then nothing at all above that).
Below, we’re looking at the low-$7k level for support, and then the $6k region should provide some strong support should we need it. It was there for us many times in the long bear market, and should be there again if bitcoin dips that far.
For now, all bets are off and conventional thinking doesn’t seem to apply. Bitcoin could soar past $10k, or it could crash to $6k. Neither would surprise us.
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