BTC underwent a strong sell off last Friday and Saturday after several days of being unable to break out of it’s downtrend line. Overleveraged longs were surely liquidated, triggering a deep panic sell off that even got down to the 42k area before subsiding. Today we’re sitting around $49k with a dead cat bounce off the lows in progress that has left a substantial tail on Saturday’s candle.
A significant amount of technical damage was done to the chart over the weekend. The $53k support level was relevant for a small bounce on Friday but was quickly blown through invalidating the megaphone pattern. The uptrend line off the July lows was also lost before support was found at the 200 moving average and the previous market structure bottom that marked the September lows.
The key tell that price wasn’t ready to move higher last week was the inability for BTC to break out through its downtrend line after attempting it for several days. Ultimately a fractal top as well as bearish inside bar came in and price broke to the downside.
Where are we now?
As of today price has held above 200ma support and is in the process of cleaning itself up after the weekend sell off. Yesterday closed as a bullish hammer and so far it looks like that may be the case today as the bulls try to reclaim lost ground. Unfortunately when a tail like this is left in a sell off it often means that most, if not all of it will need to be tested before a bottom can be established. Bulls really want to see the 200 moving average support hold and closing below that level will suggest even lower. Rejection at the last all time highs leaves us stuck in a range that still has considerable risk to the downside with the midpoint range low around 49k and even $28k if you’re looking back to the June lows.
Location
-Bearish volume broke recent highs and is still in control while the bulls have not been able to step up with the same intensity.
Indicators
-Indicators still look quite bearish with only a potential bullish div forming in MACD.
-OBV still looks weak and unable to get above moving average.
-RSI has not closed in oversold territory yet and that is something to still be looking for.
Market Structure
-Support was found down against the previous bottom in September.
-While yesterday’s candle was a bullish hammer, technically a bearish inside bar confirmed and Saturday’s wick is ominous and still likely to be tested.
-Currently there is no bullish candlestick on the daily chart.
Next Moves
The next move for me is to wait for all of this to clean up. At the moment I don’t believe this sell off has fully resolved and I think there is too much risk to the downside to justify bullish setups on the daily chart. I do like the trade location for longs down against the 200ma and would like to see consolidation and eventual breakout right above it but that hasn’t materialized yet. For now I think it is likely that price still needs to explore Saturday’s tail and there’s a high probability of that happening before a bullish setup comes in.
Happy Trading!
