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Tuesday Inferno market update

Tuesday Inferno market update

Analysis

We knew the correction was coming. We just don’t know how far it will go…

 

Bitcoin is back in the red. After a doji candle on the weekly – a sign of the market’s indecision – the price faltered and finally crashed. At the time of writing, BTC is trading at around $7,900, having hit a yearly high of $9,097 last week and touching a low so far today of $7,730.

 

This should not come as a surprise. We know that parabolic increases are unsustainable. Bitcoin spent just minutes above $9k. We had bearish divergence on the 1-day chart. This has been coming a long time.

 

So the question is: where will the falls end?

 

You can never predict the market, but you can take educated guesses, reduce risk and maximise opportunity. So here’s how it looks:

 

We have support at $7,600, coinciding with the 50% fibonacci retracement from the recent move above $9k, starting from the recent pullback to $6,200. But very likely we need to look at the bigger picture here, because this feels like a more significant wave in the market’s development.

 

If we look at the whole rise, from the very low of $3,100 up to the high of $9,100, we can see that we have our 23% fibonacci level around $7,700, which coincides with existing support. There is also good support in the $8k zone – but for the time being, that has turned resistance since we are trading underneath it. We’d ideally look to move higher and back-test $8k.

 

It’s also worth noting that there is coincidence between existing support at $6,800, the 50-day moving average, and the 38% fib from the whole year’s run-up.

 

Further down, $6,100 lies at the 50% fib and, of course, is within the strong support that was established throughout last year and checked only recently. That seems like a reasonable target for this retracement – though as ever, this is not trading advice and is offered for information only. Finding support and consolidating here would be very bullish.

 

Why? Because this is how bear markets end. A downtrend, followed by a crash to a new low: capitulation. A bounce from the low, a break of resistance (established by old support), and then a back-test of that resistance as new support. In our case, there was resistance at $4,200, but stronger resistance in the $6k zone. Testing that and moving back up would be confirmation that the bull market is on. It would also prove a very attractive risk/return point.

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