Technical Analysis and Market Entry: Bitcoin Demonstrating Growing Vulnerabilities of An Imminent Drop

  • BTC/USD price action is consolidating following the surge higher late in October.
  • The price has been narrowing for the last twelve days, ahead of the next committed move.

BTC/USD Recent Behaviour

The Bitcoin price is very much stuck within consolidation mode, which has been observed since the back end of October. BTC/USD have attempted to stabilize above the $9000 mark, within the past days. It follows a surprising 40% surge between 25 – 26 October, the price had jumped from $7400 up to a short-lived high of $10,400.

It came as a surprise because Bitcoin had been stuck within a stubborn bear market. The price between 15 August – 23 September, had formed a bearish pennant structure. The bears managed to capitalize on this, inviting a fresh wave of selling pressure.

Furthermore, from 25 September – 22 October, another pennant was constructed. The price breached the pattern, force a strong drop; however, it was short-lived. The big bull action, as noted above, came into play, proving it to be somewhat of a technical fakeout. A move which was also somewhat exacerbated by the narrowing range breakout, trading conditions had been tight for such a long period.

Weekly Chart View

BTC/USD had run into a chunky area of supply, which runs from $9200 up to $10,000. The price had not traded above here since 23 September, when a bear market kicked back into gear. Bullish momentum has failed to pick up pace via the weekly chart view, following that huge week which commenced on 21 October.

BTC/USD weekly chart.

Daily Chart View

Price action via the daily chart view is testing a critical ascending trend line of support, tracking at $9200. It should also be noted as a daily level of comfort; a breach could very likely spark much panic selling. Aside from the supply as mentioned above, in proximity is the 38.2% Fibonacci causing some problems for upside. The narrowing range seen of late is a growing case for an explosive breakout, which at present appears to be tilted to the downside.

BTC/USD daily chart.

Trade Recommendation

Given the continued testing from the bears on the critical ascending trend line and a daily support at $9200, another fall lookings increasingly likely. Downside targets of interest seen at $8650, $7850 and then $7500. An entry around the current market price stops placed $10,000.

Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Ken has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.