Hi friends hope you are doing good. In my previous post I have shared with you that the price of BTC has formed a bearish BAT on a short time 4 hour chart, therefore a drop was expected and we can see that the price action was not able to move up from the potential reversal zone of this BAT pattern. And first price action dropped on 15th of May and now we have witnessed the recent drop upto $8800 as per bitstamp exchange. This drop is up to 0.618 Fibonacci golden ratio therefore there can be possibility that the price action I will try to move up from here.
RSI was giving bearish indication:
In my previous article we were watching the movement of the price action and the RSI on 1 hour chart. But this is now reflected upto 4 hour chart. And we can clearly see that the price action was moving sideways on the other hand the relative strength index was in downtrend. As we have already discussed that if the price action is moving sideways or upward but the RSI is in downtrend then it is if bearish signal and we can expect a drop. Because in most of the cases the price action follow the trend of RSI.
Is it a double top?
After hitting the $10,000 the price action dropped down and recently it reached again very close to the $10K and now moving down. Most of the traders are considering it as double top move that can lead to a very big drop. But if we watch closely then it can be clearly seen that after reaching at $10,000 the price action did not drop even upto 0.382 Fibonacci retracement, therefore this drop was not sufficient to be called as a double top that can produce drastic downward move.
Bull flag or bull trap?
On the daily chart the price action of BTC is forming a 3rd bull flag. At this time the price action is moving sideways and being consolidated between the current expected bull flag. Now if the price action will be moved up from here then it can from another bull flag or otherwise if it will be dropped down then it can be able trap that can lead to a downtrend.
Will Bitcoin follow the same pattern with combination of these indicators?
In my previous post we have observed that since October 2019 the price action of the leading cryptocurrency is following a specific move with the combination of different indicators: the MACD ,vervoort heikin Ashi long-term candlestick oscillator and the Stochastic. And we have witnessed that when the vervoort heikin Ashi long-term candlestick oscillator turns green then first the MACD gives the sell and then buy and the sell signal again then Stochastic gives bear cross and the price action starts a bearish rally. This time when the vervoort was turned green then MACD gave sell, buy and selll signal. Therefore if the price action of BTC will follow the same pattern then we can expect another drop that can lead the Stochastic to enter in the over sold zone.
The channels and moving averages:
We can see that price action has again formed another channel like it had formed back from December 2019 to February 2020. At this time the priceline has reached at the support of the channel as we were expecting there are chances that the price action will take another bounce from here to reach the resistance level. We can also see that the 50 simple moving average has formed a golden cross with 200 simple moving average. This golden cross between the 200 and 50 SMAs is considered as a strong buying signal among the traders community. Therefore there are chances that now the traders will jump in and lead the price action up to the resistance.
For better understanding you can watch the below video:
EMAs can give us idea whether the priceline will breakdown the support or not:
If we take a look at the previous channel then we can also find such golden cross between the 200 and 50 SMAs. But at that time these moving averages could not provide strong support then how we can predict that this time the Bitcoin will not break down these two simple moving averages. For that we need to watch the movement of the exponential moving averages with the time period of 10 and 21 on the same daily chart. And it can be clearly seen that before the priceline broke down the simple moving average 200 and 50, it broke down the exponential moving averages on 27th of February. That was a clear indication that the price action has turned bearish, therefore the simple moving averages were also broken down. But this time the price action is using the EMA 10 and 21 as support if these exponential moving averages will be broken down then we can expect that the priceline will also break down the channel resistance and the SMAs can also be broken down.
Down channel on long term chart:
Here I would like to recall the down channel again that has been formed on the weekly chart. At this time the price action is trying to break out the resistance of the channel that is really very strong and not broken down since June 2019. Once this resistance will be broken out then the Bitcoin can start as very long term bullish rally. If we watch the simple moving averages on this chart with the time period of 50, 25, 100 and 200 then all the moving average it has almost form the golden crosses with each other. The only final golden cross between 25 and 50 simple moving average is due. Once this bull cross will be appeared then a complete opened alligator mouth of SMAs will be formed that can lead the Bitcoin towards achievement of higher price ever in its history. And it has already happened before Dec 2017.
Resistance block is not broken out sofar:
Finally I would like to talk about the most strongest resistance block that the price action of Bitcoin is not able to break out since October 2019. This is a most strongest block that has been working some times as support and some times as resistance since January 2018. The BTC needs to break out this resistance bock then it can also break out the $10,000 resistance level. But in my point of view this is block is more important than the $10,000 resistance level.
Sofar the support of the channel on the daily chart is holding the price action well. If this support will be retained then the price action can again start bullish move for the breakout. But once this support will be broken down then we can witness a further down rally up to the 200 SMA that is at $8000.
Note: This idea is education purpose only and not intended to be investment advice, please seek a duly licensed professional and do you own research before any investment.