Liam Frost · 2 days ago · 2 min read
News › Bitcoin › Technical Analysis
Bitcoin fails to stay above $12,000 signaling a drop below $11,000
Disclaimer: This article contains technical analysis, which is a methodology for forecasting the direction of prices through the study of past market data, primarily price and volume. The content presented in this article is the opinion of the author. None of the information you read on CryptoSlate should be taken as investment advice. Buying and trading cryptocurrencies should be considered a high-risk activity. Please do your own diligence and consult with a financial advisor before making any investment decisions.
Despite the bullish price action the last two weeks, Bitcoin was once again rejected at $12,000 resistance. A move above this level could take BTC to new yearly highs, but it seems the cryptocurrency may need to correct further to allow capital to flow into the market.
The following technical analysis will evaluate whether Bitcoin will first make new highs or if another correction is needed before a continuation of the bullish trend.
Bitcoin technical analysis
Bitcoin’s recent 34.6 percent retracement dropped its price below the 7-week moving average for the first time since mid-February, giving signs that a deeper decline is underway. Nonetheless, the coin managed to regain support at the 7-week moving average and last’s week candlestick was the highest weekly close of 2019—a sign that the correction has ended.
Now, Bitcoin seems to have resumed its upward trend. The TD sequential indicator turned into a green two candlestick. Based on this technical index, BTC may make new yearly highs once (and if) the current green two candlestick trades above the previous green one candle, a buy signal. If this scenario takes place, the TD sequential indicator predicts seven weeks of upward momentum before a sell signal is given in the form of a green nine candlestick.
Bitcoin seems poised to make new yearly highs, but it will first need to break through several notable resistance levels. On the 3-day chart, the areas of support and resistance given by the Fibonacci retracement indicator stipulate that BTC is currently trading between the 23.6 and 16.18 percent retracement levels.
A move above this zone will potentially take BTC to test the yearly high of $13,870 before testing new all-time highs. On the other hand, a move below the 23.6 Fibonacci retracement level could take BTC down to the 38.2 percent Fibonacci retracement level around $9,770.
Based on the 1-day chart, it seems like a retest of the 38.2 percent Fibonacci retracement level could come before a break of the $13,870 resistance level. Under this time frame, a bull flag appears to be forming. This is considered a continuation pattern that develops after strong upward movement—known as the flagpole, and is succeeded by a consolidation period, known as the pennant—that tends to breakout in the direction of the previous trend.
At the moment, Bitcoin seems to be in the consolidation phase of the bull flag pattern. Since BTC appears to have failed to break out of the pattern, another ‘swing low’ (the trough in a trend that is less than 20 trading periods) could be expected. Such a swing low could take the price to the 38.2 or 50 percent Fibonacci retracement levels.
If there is a breakout, the bull pennant predicts a 45 percent target to the upside (determined by measuring the height of the flagpole). If this bullish formation is validated, it could take Bitcoin to around $17,500.
If Bitcoin is instead bound to make a swing low before it tries to break out of the bull flag pattern seen on the 1-day chart, then the moving averages could help identify the different price levels that will act as support on its way down.
At the moment, there is strong support at the 100-twelve hour moving average around $10,900. Should the moving average fail to support the price then a blow out to the 150 or 200-twelve hour moving averages is expected, according to the 12-hour chart.
The above scenario resembles forecasts from the descending parallel channel that formed under the same 12-hour timeframe.
BTC reached the top of the parallel channel and failed to break above $12,000 levels. Now, the coin is more likely to retrace to the middle or the bottom of the channel. Depending on support at the middle of the channel, Bitcoin could rebound to test $12,000 again. Otherwise, the cryptocurrency is likely to fall to the bottom of the descending parallel channel.
Bitcoin entered a consolidation period on June 26 after reaching a high of $13,870. Since then, the cryptocurrency is making lower lows, a contributor to a potential bull flag formation on the 1-day chart. The technical pattern predicts a 45 percent upswing upon breakout, but Bitcoin may instead be bound to make lower lows before buying pressure and volume increases and BTC is able to break out of the current consolidation pattern.
As a result, a move below 100-twelve hour moving average on the 12-hour chart could take BTC to a lower low. Meanwhile, a break above the recent weekly high of $12,320 could be taken as a sign that the bull trend will continue.
It is worth noting that despite Bitcoin’s unpredictable price action, this cryptocurrency entered a bull run that most likely will take it to new yearly highs. In the long-term perspective, the golden cross that developed between the 50 and 200-three-day moving average on the 3-day chart is a clear sign that Bitcoin is in a new bull market.
The last time this technical formation occurred was in January 2016 and was succeeded by 5,420 percent upswing. Although there are no guarantees (and price predictions are often outright wrong) these indicators suggest the bull rally is here to stay.