After a month of low volatility, more exciting times for bitcoin traders are finally back. It all started a week ago, when bitcoin crashed from its eternal mid-range. Things didn’t look good and Monday was poised for more blood.
Blood did happen, but not the way people expected. Due to a situation regarding the credibility of tether dollars (explained here), the price of bitcoin first exploded upwards. It rose all the way up to $7,800 on Bitfinex, achieving a higher high and breaking out of the main diagonal resistance. However, this wasn’t the bullish breakout people were waiting for.
Rather, this was a fakeout of epic proportions. After achieving this high, bitcoin fast retraced under the resistance area. It is now again hovering in the eternal mid-range. Furthermore, as far as indicators go, things are not looking too good.
However, before focusing on the price action, there’s another thing to be aware of.
Charting on Bitstamp or Coinbase BTC/USD pair is highly recommended
I usually use data from Bitfinex exchange for charting bitcoin. It’s got one of the highest volumes and is considered as a market mover. But because of the aforementioned tether meltdown, the Bitfinex chart is not credible at the moment. The price of bitcoin on Bitfinex is still about $230 higher than its price on exchanges offering fiat trading. This price divergence reflects the $USDT / USD ratio. At the moment, it is about 1/0.97.
So, until tether stabilizes back to its 1-1 dollar peg, I’ll be using the Bitstamp chart. The rest of the market actually follows it and therefore Bitstamp data offers a more concise assessment of the situation.
4 hour time frame:
As you can see, the main support and resistance remain the same as a week ago. If the price manages to cross either of them, you can expect similar price action to take place as it did on Monday on Bitfinex. However, this can happen in either direction.
The price is currently having some difficulties to stay above $6,350. If this support fails a retest of the $6,100 area is highly likely.
The 200 moving average (red line) will be probably acting as resistance through the weekend. The MA50 (blue line), sitting just below $6,350, also confirms the above mentioned support area. A 4 hour close below or above either of these moving averages will be a powerful signal to go either short or long.
If the price manages to cross below $6,350, the ADX indicator will make a bearish cross. This would be a red light for any bullish entries. Nevertheless, be prepared for both scenarios. As I said, volatility is back and it seems that a potential for great trades is back on the menu.
Daily time frame:
The descending triangle is still acting as resistance. We’ll be leaving it behind only in case we break above $6800. But before this takes place, the price still has to overcome the 6,650 resistance area. Finally, the MA200 is even higher up, at $7,200, joined by the upper boundary of the ichimoku cloud. If bitcoin breaches this, the hopium high will probably lift me into the stratosphere.
However, the path downward seems to be much more clear, with only MA10 propping us up. Also, as you can see, RSI is currently sitting on its mid-range support. If that breaks, we’re in for a re-test and a bearish peak into the abyss.
The eternal mid-range can chop you up
Before deciding upon trading bigger positions, do take a look at the daily price action of the past month and a half. The price was squeezed into a relatively tight range. However, even as tight as it is, this chop is more than capable of decimating your bankroll.
Trade with caution.