Bitcoin - Broader Correction Into Support Zone
Overview:
As we mentioned previously the 9340 level was a significant support / resistance level for bitcoin, where we often see a battle between the bulls and the bears. Clearly the bulls lost as the bears were able to push back through the support level, triggering trade stops, leading to the subsequent selloff. This resulted in the second “fake-out” as the rug was simply pulled out from under the bulls. This is why we emphasize trading at levels near major resistance areas are “aggressive” higher risk trades and you should position accordingly.
Technical:
There is a clear defined five wave cycle now, and the chart has been adjusted accordingly. We mentioned in the previous post that this was “likely a corrective sequence” and “likely” has turned to “is”. Though there was a wave count that took us to 11k before a broader correction, this is now negated as mentioned in the previous article.
Chart levels have been updated slightly as the pullback provided a clearer picture of the overall wave structure. BTC' fell through the initial support zone, but often (C) legs pullback to within wave (iv) which overlaps with the 0.50 and 0.618 retrace of wave (1) between 7809 and 8183. This provides the best opportunity for a trade setup and reversal.
I added two additional indicators to the chart with the 50 DMA and the 14 day RSI. Though many traders use these as signals, they lag the market, only providing insight into the past and not the future. Trading these types of “past looking” indicators alone can result in portfolio erosion as many found out trading the “death cross”.
The RSI broke 50 and has now settled into the 40 support level as bullish markets often trade out of the 35-40 area. More aggressive traders can look for short term trades from the 50, but these are higher risk areas to trade from.
The 50 DMA may provide initial support since this is a common level for traders to focus on. It is never a bad idea to see what the market is looking at – hence adding it to the chart. Clearly the 200 DMA was a resistance level where traders sold, so we can not just ignore these types of indicators, but trading them alone can lead to losses. They provide more weight when they overlap with a significant support or resistance level for which the 200 DMA did at both the 9696 and 9970 levels.
Summary:
Though there was the potential for the market to move higher before a broader correction. This simply did not happen. Thursday confirmed Bitcoin was already in a broader correction cycle. We have adjusted our charts accordingly as we adapt to the current market conditions.
As we mentioned previously the 9340 level was a significant support / resistance level for bitcoin, where we often see a battle between the bulls and the bears. Clearly the bulls lost as the bears were able to push back through the support level, triggering trade stops, leading to the subsequent selloff. This resulted in the second “fake-out” as the rug was simply pulled out from under the bulls. This is why we emphasize trading at levels near major resistance areas are “aggressive” higher risk trades and you should position accordingly.
Technical:
There is a clear defined five wave cycle now, and the chart has been adjusted accordingly. We mentioned in the previous post that this was “likely a corrective sequence” and “likely” has turned to “is”. Though there was a wave count that took us to 11k before a broader correction, this is now negated as mentioned in the previous article.
Chart levels have been updated slightly as the pullback provided a clearer picture of the overall wave structure. BTC' fell through the initial support zone, but often (C) legs pullback to within wave (iv) which overlaps with the 0.50 and 0.618 retrace of wave (1) between 7809 and 8183. This provides the best opportunity for a trade setup and reversal.
I added two additional indicators to the chart with the 50 DMA and the 14 day RSI. Though many traders use these as signals, they lag the market, only providing insight into the past and not the future. Trading these types of “past looking” indicators alone can result in portfolio erosion as many found out trading the “death cross”.
The RSI broke 50 and has now settled into the 40 support level as bullish markets often trade out of the 35-40 area. More aggressive traders can look for short term trades from the 50, but these are higher risk areas to trade from.
The 50 DMA may provide initial support since this is a common level for traders to focus on. It is never a bad idea to see what the market is looking at – hence adding it to the chart. Clearly the 200 DMA was a resistance level where traders sold, so we can not just ignore these types of indicators, but trading them alone can lead to losses. They provide more weight when they overlap with a significant support or resistance level for which the 200 DMA did at both the 9696 and 9970 levels.
Summary:
Though there was the potential for the market to move higher before a broader correction. This simply did not happen. Thursday confirmed Bitcoin was already in a broader correction cycle. We have adjusted our charts accordingly as we adapt to the current market conditions.
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