Bitcoin (BTC) Drops $9,000 from All-Time High: Is the Correction Done?
On reaching its recent all-time high of $124,000 the Bitcoin price dropped precipitously, losing $9,000 since Thursday. That said, Momentum indicators have had the opportunity to reset. The next upward impulse may very soon be on the way.
Long liquidations crush the bulls
The crypto market suffered one of its habitual bloodbaths on Sunday and into Monday, with more than half a billion dollars of value liquidated across the board. More than five times long to short traders were liquidated, showing that the bears were firmly in control.
The new week has opened with the bulls attempting to stop the rot. Will there be another sharp flush down to the area of $112,000, or is the next upward impulse about to kick in?
Is a reversal back to the upside on the way?
Source: TradingView
Not long after making an all-time high, the $BTC price plunged back down to the top of the bull flag, and has now dropped back inside. The bears are probably congratulating themselves on an important victory, but the short-term chart is suggesting that a reversal back to the upside could be on the way.
The price action is currently sitting on some horizontal support, while only just above, the $115,800 level has recently become resistance. Which way will the price go?
The two indicators at the bottom of the chart are signalling that it could be back to the upside. Firstly, the Stochastic RSI has its indicators just about at the bottom, which is also the case for all the other short-term indicators. Even the daily is now starting to approach the bottom.
The Relative Strength Index (RSI) has its indicator right at the boundary of the oversold level. When looking left at the history of the RSI for the 4-hour time frame it can be seen that the price will normally bounce from this position.
Of course, there is always the chance of a further slip to the downside, but the evidence is that $BTC is becoming oversold, and so there is more likelihood of an upside move from here.
A correction to the 0.786 Fibonacci level?
Source: TradingView
The daily chart for the $BTC price reveals how the price touched the $115,000 support level. Just below this is the 0.786, the deepest of the Fibonacci levels for the whole of this bull flag move. Coming back to this level is certainly a possibility.
At the bottom of the chart, the Relative Strength Index (RSI) looks as though the descending trendline could get a perfect retest from the indicator line. This would likely be followed by a bounce back to the upside, which would probably be reflected by positivity in the price action above.
Inverse head and shoulders pattern still valid
Source: TradingView
Zooming out a lot further in the same daily time frame, the inverse head and shoulders pattern is still a valid formation. A test of the neckline took place when the $BTC price fell through the bottom of its bull flag, and it could be that a retest might take place in this current retracement.
It can also be seen that even though this dip is coming down deeply, it still has a way to go to make a lower low and start a mini downtrend. If this did happen, it could of course negate the inverse head and shoulders. As it stands, this is not the expected course of action but the market does have a perverse way of going against expectations.
$117,000 becomes make-or-break level
Source: TradingView
Finally, right out in the macro view of the 2-week time frame, there are concerns for the bulls. Yet another 2-week candle body closed beneath the $117,000 resistance level. Also, another longish candle wick to the upside bears testimony to the power of the bears at what is becoming a make-or-break level.
The ascending trendline, which marks the neckline of the inverse head and shoulders pattern, is squeezing the price into a tighter and narrower space, meaning that an explosion could come in one direction or the other.
At the bottom of the chart, the Stochastic RSI indicators are shaping to cross back down to the downside. This must be avoided by the bulls at all cost. The next two weeks will be vitally important.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
source: https://cryptodaily.co.uk