Bitcoin testing crucial support
Updated
Having formed a new lower swing high bitcoin has maintained its corrective structure. The combination of the . 618 retracement level and the top of the descending channel were too much resistance to break through, falling swiftly back down towards a major support level . Now the question is whether bitcoin can form a higher low setting up for another attempt at a breakout, or we continue this intermediate downtrend to further lows.
S/R levels
The $11100 area (top yellow line) has proven to be the most resistant level throughout this correction. From June 22nd we can see five instances where the price wicked off it multiple times, then broke through violently with a big move. Since breaking down on July 14th this level acted as tough resistance, eventually breaking up with a big move, and so should now act as solid support. In combination with the 50 day moving average, and the .382 fib level, we have a strong support cluster in the zone $10900-$11100 (circled).
Below this, I see very little in the way of serious support. The $10200 area (bottom yellow line) has shown some significance, which also lines up with the .236 fib and could potentially be joined by the rising 100 day moving average to form another support cluster. If this level is reached it is my last hope for holding a higher low. $9400 was a strong support but has been severely weakened and will surely break should we revisit this level.
A closer look
Zooming into the 4h chart we can see clearly the descending channel of this correction. Looking at fib levels from the current swing low to high, our identified support areas are further bolstered by the 0.382 and 0.618 levels.
Volume
The volume is a major concern for me here. Throughout this correction the OBV has shown weakness and there is a clear bearish divergence on this move up which suggested the rally would fail, with further decline since the top. Not to mention the CMF has fallen off a cliff, turning negative even before we broke down. I am struggling to see the strength here to break out of this corrective structure and on to new highs.
Trading strategies
I think it is pretty likely we have topped, and are going to eventually break down below $9000. However if bitcoin can muster another rally and take out the $12300 top, also breaking out of the channel, it should have the momentum to carry it to new yearly highs. As such as I have come up with an aggressive strategy and a conservative one.
Aggressive: Start building a short position now, looking to add on a retracement back towards $11800. If we break back above 112K reevaluate, check volume indicators for signs of strength and scale out if need be, potentially flipping long if rally is convincing. If we break down through support ride it to new lows.
Conservative: Wait for confirmation. If we break through support below $10900 enter a short and look to ride it down to the $10200 level, potentially taking some profits there and add back to the short position on a break below $10000. If $11000 holds, look to start building a long at a break over $12300, watch out for swing failure patterns especially if volume remains weak.
I will update this when there is a breakout.
Cheers
S/R levels
The $11100 area (top yellow line) has proven to be the most resistant level throughout this correction. From June 22nd we can see five instances where the price wicked off it multiple times, then broke through violently with a big move. Since breaking down on July 14th this level acted as tough resistance, eventually breaking up with a big move, and so should now act as solid support. In combination with the 50 day moving average, and the .382 fib level, we have a strong support cluster in the zone $10900-$11100 (circled).
Below this, I see very little in the way of serious support. The $10200 area (bottom yellow line) has shown some significance, which also lines up with the .236 fib and could potentially be joined by the rising 100 day moving average to form another support cluster. If this level is reached it is my last hope for holding a higher low. $9400 was a strong support but has been severely weakened and will surely break should we revisit this level.
A closer look
Zooming into the 4h chart we can see clearly the descending channel of this correction. Looking at fib levels from the current swing low to high, our identified support areas are further bolstered by the 0.382 and 0.618 levels.
Volume
The volume is a major concern for me here. Throughout this correction the OBV has shown weakness and there is a clear bearish divergence on this move up which suggested the rally would fail, with further decline since the top. Not to mention the CMF has fallen off a cliff, turning negative even before we broke down. I am struggling to see the strength here to break out of this corrective structure and on to new highs.
Trading strategies
I think it is pretty likely we have topped, and are going to eventually break down below $9000. However if bitcoin can muster another rally and take out the $12300 top, also breaking out of the channel, it should have the momentum to carry it to new yearly highs. As such as I have come up with an aggressive strategy and a conservative one.
Aggressive: Start building a short position now, looking to add on a retracement back towards $11800. If we break back above 112K reevaluate, check volume indicators for signs of strength and scale out if need be, potentially flipping long if rally is convincing. If we break down through support ride it to new lows.
Conservative: Wait for confirmation. If we break through support below $10900 enter a short and look to ride it down to the $10200 level, potentially taking some profits there and add back to the short position on a break below $10000. If $11000 holds, look to start building a long at a break over $12300, watch out for swing failure patterns especially if volume remains weak.
I will update this when there is a breakout.
Cheers
Comment
Well that was brutal. Once again the price has responded violently on a break through the 11k area. Support levels held for a matter of hours with buyers nowhere to be seen. The 4h chart is a disaster, 11 (and counting) red candles in a row sending OBV into oblivion. I am expecting there to be a bounce pretty soon and have some laddered short orders at levels that offered some little support around $10350, $10750 and $11100. No interest in attempting to scalp a long trade but the 100 day ma at $9650 would be the place to do it.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.