Technical Analysis and Market Entry: Bitcoin May Have To Plummet Down To $8,000 For Fresh Buying Momentum

  • Bitcoin price behaviour is showing increased risks of further downside to come.
  • Last week’s candle closure produced a bearish evening star formation, which could prove to be punishing.

Bitcoin most recently has enjoyed a period of cooling, more so a needed technical correction. The price has edged lower as much as 10%, after topping between 12-13 February, failing to break down the barrier at $10,500. It has not traded comfortably above this area since September 2019, proving its significance. Nevertheless, BTC/USD was able to trade at six-month highs, before losing some ground.

It is worth noting the strong recovery that was kick-started by Bitcoin this year already. The price has been rallying since the commence of January, consecutively for more or less five weeks. BTC/USD only last week saw it first convincing negative closure since December 2019. Bitcoin does remain up around 40%, from the beginning of 2020, which is impressive for any asset.

Weekly Chart View

There are some worrying signs via the weekly chart view, given the closure of last week’s candle. It produced somewhat of an evening star formation, after seeing a rejection at $10,500. Should another negative closure be observed, with the price closing below last week, then this would be a sign of further downside to come.

BTC/USD weekly chart.

Daily Chart View

Price action via the daily chart view has managed to catch support at the $9500 price area, a psychological cushion for Bitcoin. A known area of demand is also serving as safety for the price at present, which runs from $9900-200 range. Separately, it is worth noting that BTC/USD is moving within an ascending channel structure. The formation of this has been in play since 2 January and remains very much intact.

Given the above described technical structure, it does leave Bitcoin vulnerable to downside risks. Typically, ascending channel patterns are subject to a breakout south, which would invite a fresh wave of sellers. The price at present is tracking very closely to the lower running trend line of the channel; it is seen at $9600-500.

BTC/USD daily chart.

1-hour Chart View

BTC/USD via the hourly at the time of writing is moving within what appears to be a rising wedge or a bearish pennant. Tying in with the earlier noted ascending channel structure, this is another sign that downside may not be over just as yet. The lower acting support of this pattern is seen at $9700.

BTC/USD 1-hour chart.

Trade Recommendation

Given all the above described, vulnerabilities are to the downside, bias near-term has shifted in the favour of the bears. Entries around the current market price, targets south; $8900 (38.2% Fibonacci), $8450 (50% Fibonacci) and then $8000 (61.8% Fibonacci). Stops placed at $10,700.

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.