Lots of blood in the markets.
Last week we said:
With BTC continuing to bounce, the deciding factor will be if it can break the $10.8 – 11k resistance zone. After that, $12k is the ceiling before breaking new ground. If BTC fails to break resistance, it will retest support at $10k.
This is EXACTLY what happened! Bitcoin moved up and tested the 10.8-11k resistance and failed to break the key level. Effectively this created a “lower-high” in the charts, which is a short term bearish signal. As such, the price has retraced and is currently trading around $10.4k, just as we predicted. Let’s take a look at what the charts are telling us this week and try to determine market direction.
This article is educational in nature and should not be taken as financial advice. Do your own research before making any investment decision.
Price Analysis
Bitcoin has corrected from last week’s high of $11k, but has found a temporary support around $10.4k. It’s decision time for Bitcoin. Support levels are at 10.4k, 9.8-10k, 9-9.2k, 8.5k, 7.2k, and then 5.5k. If Bitcoin fails to hold at 10.4k, a drop to the psychological level of 10k is likely, followed by trend support at 9k. Failing to hold 9k would be a confirmation that the bull market is over, and we are likely in a bear market. Failure to hold 10k would mean an extended period of consolidation is the most likely scenario.
The Daily candle chart is very telling of the current situation. It’s a make or break moment for BTC. As you can see, the 20MA (dark blue) is pending a bearish cross over the 100MA (yellow), which would signal a shift into consolidation. Right now, the 100MA line is acting as strong support, as it did in early September with multiple retests. Below this is the 200MA (light blue), which is our trend support. Specifically, this support is at 9.2k, but wicks to the 9k level are possible if this level faces testing.
The hourly chart also shows a rather bearish scenario, with a death cross imminent. The 20MA has already crossed below the 200MA, and the 100MA is about to cross as well. This confirms a short term bearish trend, meaning that a retest of 10k is likely, but not guaranteed.
Investor Sentiment
Taking a contrarian mindset can be quite profitable as a trader. By taking positions opposite to the overwhelming sentiment in the market, we will be in a good position when the market inevitably changes. As such, when these indicators give off a reading of “Fear” or “Extreme Fear” – we see it as a buying opportunity. The famous quote by Baron Rothschild, a British nobleman and banker from the 19th century says, “Buy when there’s blood in the streets, even if the blood is your own.”
Both indexes agree that the markets are moving toward “fear”. While we see this generally as bullish, there is still plenty of room underneath before the fear becomes ripe enough to swing trade. Enter positions with caution.
Fundamental Analysis
The fundamentals are actually showing a glimmer of hope for BTC despite the impending bearish price action.
The Hash rate is still at an all time high, meaning mining is still rife with competition.
Combined with relatively low transaction fees, miners revenue is still close to yearly lows. Remember, miners are good traders and as such they will not sell at a loss. If the hash rate is high, the cost to mine 1 BTC means that the inherent value of BTC is still high. Smart miners are not selling rewards right now. This is bullish for BTC.
Analysis
Like we said, BTC is testing $10.4k, but with an imminent death cross on the local hourly chart, a retest of the 10k zone is possible if not likely. I would expect this to be a quick touch, “wicking” below the 100MA on the daily chart but closing the day above 10.4k. Failing to do this would indicate that a retest of the trend support at 9.2k is likely, followed by a long-term consolidation phase.
TLDR
- Short Term: Bearish
- Medium/Long Term: Neutral
