Technical Analysis and Market Entry: Bitcoin Subject to Another Round of Selling Before Bulls Return

  • The Bitcoin price is consolidating following brutal selling in November; further moves south may still be on the cards.
  • BTC/USD price action is moving within a bearish pennant structure via the daily. 

BTC/USD: Recent Price Behaviour

BTC/USD is moving within consolidation mode, as the bears slow down the selling intensity for now. Price action throughout November has very much been tilted to the downside, with the price trading just off seven-month lows. Last month alone the Bitcoin dropped a chunky 35%, falling from $10,000 down to as low as $6508. It was the worst monthly performance that has been observed since November 2018, as the price headed for the bottom for that year.

The BTC price has fallen from a high of the year up at $13,900, dropping some 53% since. Selling pressure came into play after the bulls had failed to breakdown a chunky area of supply. The barrier runs from $13,000 – $14,000, which if broken down, could have provided another strong wave of buying pressure. BTC/USD has not traded above the noted zone since January 2018. 

BTC/USD daily chart

Descending Channel Structure 

Since the above-detailed rejection, the Bitcoin formed and continues to decline within a descending channel structure. Any near-term rallies that are observed are sold by the bears; upside momentum remains unsustainable. There have been several attempts to break out to the north from the noted pattern; however, the upper acting trend line has proven to be stubborn. 

The detailed formation can also be viewed as a potential bullish flag structure, subject to being capitalized by the bulls. The pole of the flag is the pumping seen from the start of 2019, where BTC/USD had initially gained over 300%. Despite the current bear market, this described technical structure does provide hope for the price longer term. 

Bearish Pennant 

Over the last fifteen days, price action has been very narrow, as Bitcoin consolidates. Given the described behaviour, BTC/USD has formed a bearish pennant. It does increase vulnerabilities to the downside for Bitcoin, as the sellers ease off the pressure for now. Should the buyers fail to escape this formation, then another round of selling will be expected. 

Trade Recommendation

Short positions do appear to be favourable, given all detailed above. An entry would be of interest around the current market price, with targets at; $6500, $6000 and then $5000. Stops to be placed just above the pennant at $8100, leaving some breathing room, in case of short-term spikes higher. 

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.

Author:
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.