It's been an ugly couple of weeks for Bitcoin and in less than a month price has plummeted from $6k all the way down to the low $3k's. Hopefully everyone saw my market update from back in October and were prepared for this scenario. After a 50% drop, what's next?
The Bitcoin monthly chart does not look good to be honest. The last candle absolutely nuked through one of the biggest monthly support levels, though it's worth noting there wasn't a ton of confluence on the lower time frames. The only remaining support range before $1000 sits roughly between $2300-3000 and the upper region has confluence with the 50 month moving average.
Support: $2300 & $2850
Resistance: $4300 & $4800
Given that the weekly closed this is the chart I'll focus on the most. After posting a doji in the middle of the support range, bitcoin followed up with a drop below support and ultimately closed below the former support range and nearly touched the 200 week moving average. At this point it seems pretty likely the lower support range between $2500-3000 is tested but ideally the weekly never closes below the 200 week moving average; a big wick through it is fine but I don't want to see the body of the weekly candle close below it. There is a notable extended bull div on the Stoch RSI though if price drops much further without a decent bounce this stands to be invalidated. On the positive side, we're finally starting to see some volume after it stagnated for the past several months.
Overall the weekly chart suggests that the end of the massive drop is near and I'm expecting a conclusion by the end of 2018 or early 2019 if not within the next week or two. However, if Bitcoin does manage a rally and breaks through some of the local resistances the $5800-6000 level will be a tough one to overcome.
Resistance: $3600, $4000-4100, $4600
On the daily Bitcoin lost the $3600 support and was rejected by it on the most recent close which sets up a potential bearish support/resistance flip. There's also clear resistance above that level as shown by the red boxes so there's a lot of obstacles for Bitcoin to clear on it's way up. There is a very clear bull div on both the RSI and Stoch RSI and sell volume is declining which should give the bulls some hope but unless $3600 is reclaimed soon and $4000 in the near term, I think it's very likely we visit the lower support range. Below that is the $1800 level which I don't honestly see Bitcoin reaching, however if $2550 breaks it's in the cards.
Resistance: $3600, $3800, $4000, $4500
There's some bullish price action developing on the lower time frames as shown by a higher low and higher high on the hourly chart and a nice run up on the RSI. However, I think Bitcoin is setting up for another bloody Monday. Price ran right into resistance and was rejected and is currently in the process of re-testing it without much follow through. There's also an ascending wedge forming which rarely break to the upside and there's overhead resistance starting around $3700 and working it's way up to the dowtrend line at $3800. Worst of all, price is rising on declining volume which we've seen time and time again over the past few weeks. It's highly likely price breaks down here or closer to $3800 but the reaction after that will be telling. A bounce from the $3500 region would maintain the series of higher lows and could offer a bullish setup; a break below $3400 and Bitcoin will likely re-test lows.
Summary on Bitcoin Price Action
Although lower time frames are showing price action suggestive of a local bottom, it seems the run may be nearing an end and the low time frame conclusion of this could give a hint at where higher time frame price action will head. However, at the moment the high time frames lost the critical $3600 support and given how weak recent bounces have been $4000 seems a long way off. At this stage further downside in the vicinity of $2500-3000 looks more likely than rallying above $4000. I'm fairly optimistic that range will be the Bitcoin bottom but there's no way to know until we see what the reaction is. Right now the one thing I do know is that I'll be short on any lackluster bounces in this range and will definitely be a buyer sub-$3000.
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