As was to be predicted, the much-anticipated breakout of the Bitcoin price from the narrowing wedge did arrive, except it went to the downside, when I was hoping for the opposite. The drop of just under 5% initially was minor and there are other positive indicators that keep my opinion slanting towards the bullish side which I will mention now.
The initial breakout on the past Saturday, within the past 48 hours, was much smaller than expected. Around 5% is not much movement for Bitcoin, particularly on a weekend when volume is low and price is easy to manipulate by some large whale.
The massive volume candle at the time of the break to the downside showed a lot of selling. Many analysts and traders were probably watching for the same imminent breakout and when it showed itself, everyone hit the FOMO button and rode the short to the shore. The support around $11 200 held well, with only one break, which was quickly bought back up by the bulls. This indicates strong defence of this area above $11k for now.
On the 4 hour chart of Bitcoin we can see that the 21 day Estimated Moving Average has just crossed below the 50 day EMA. On the other hand the 100 day EMA has just crossed bullish up over the 200 day EMA. This is a little mini golden cross if you like. We could see a major converging of price into more sideways range bound movement in the short term.
If we zoom out and look at the longer term picture, we can see that Bitcoin price is in an overall gradual descending channel, since the recent yearly high of around $14 000. I was being overly optimistic recently in hoping for a breakout of price from this channel to the upside. Price was right at the top of the range when the breakout occurred to the downside recently.
Volume continues to decline on the daily and 4 hourly, though not significantly. One interesting point is that price is right around the 50% mark on the Fibonacci retracement line from the ATH around $20k to the recent bottom at $3100. I am an admirer of the Fib tool and the philosophy behind it of the universe being all in alignment with the Golden Ratio on all levels. Throughout Bitcoin’s price history we can see how price seems to follow the Fibonacci levels on its swings between high and low.
The 50% retrace in price is around $10k, from the ATH of $20k, but the Fibonacci retracement tool puts the 50% retrcement point between the $20k point and the $3 100 low, at around our current price - $11 400. Hopefully price can hold this level, which was a crucial resistance level back in the bear market of 2018. In February and March 2018 price twice tested this level and was unable to break above it. In our current situation, since we are above it, I’m hoping that this $11 400 region can act as support, though it is on the edge at the moment.
On the daily chart, the 21 and 50 EMA are still well above the 100 EMA and aiming upward. In coming days they could all align possibly. I have noticed repeatedly how such alignments where at least three EMAs converge, can result in a breakout in either direction. Naturally as price squeezes into an ever-narrowing band, it coils up like a spring, only to demand an outlet at some point.
If price continues in its current format, then we should see some more downside toward the lower edge of the descending wedge on the daily chart. The next Fib level down is at the last two lows of the double bottoms of July, which is around $9 300, give or take $200. That is also where the current 100 day EMA is sitting. Depending on where the 3 EMA prices converge in coming days, that is where we could see our next breakout in either direction. This might be at the end of the month latest.
None of this is investment advice of course, just my opinion. We also need to consider the fundamantals and also the current global macro economic trends and their impact on Bitcoin price direction. It may be a more attractive safe haven to some now. Bitcoin certainly wasn’t around in the last financial recession of 2008, so this is new territory for everyone. Let’s see which way the flag flies this time around.
