Bitcoin fell through the bullish pennant trading sub 10k. The drop to the 8k zone was expected.

 

Bitcoin’s Drop to 8k expected

I have written a couple of articles since June detailing some of the conditions that should be met before Bitcoin could experience a test of the all-time high. Back on July 22nd, I wrote about why Bitcoin dropping to 8k is, perhaps, essential. And just last Friday (September 20th, 2019) I went into significant detail regarding the bull flag and the common behavior that price experiences inside a symmetrical triangle. In last Friday’s article, I wrote that the $8,820.35 value area was expected because the highest probability is a breakout lower. And the highest probable behavior that Bitcoin would experience directly after that drop would be a swift return to the bottom of the triangle followed by a short period of consolidation, and then a resumption of the move higher.

 

A tale of two Fibonaccis

There are two Fibonacci retracements drawn on the chart above. The black Fibonacci retracement lines are done using a linear retracement while the green Fibonacci retracement lines are done using a logarithmic retracement. Also – observe the price levels used in the drawing of these Fibonacci retracements. Both begin with the 2019 swing high of 13868.44 and are then drawn to the February 6th, 2019 swing low of 3340.8. Some may ask why the retracement is not drawn to the major swing low – the 2018 swing low – of 3128.89. The reason for this is Gann based. Constance Brown upturned the world of Fibonacci analysis by using a swing low or swing high that Gann called the confirmation swing. Instead of drawing the retracement from extreme to extreme, you instead start with an extreme and then retrace to the next higher low or lower high. In this chart’s case, we are using the next higher low, which is the confirmation swing.

At the time of writing this article (1600 EST), Bitcoin has dropped more than -14% to the current daily low of 8159.35. It fell through the linear 50% Fibonacci level at 8604.62. It is currently testing the logarithmic 38.2% Fibonacci level at 8051.63. If price breaks that level, then the next support level is the linear 61.8% Fibonacci level at 7362.36 – followed closely by the logarithmic 50% Fibonacci level at 6806.74. The move down to the 6800 area would make the most sense as it tests at least three extremely important levels. First, the 6800 value area is the 2018 point of control. Second, the 6800 value area is the top of the cloud made up of Senkou Span B – the most difficult level for price to cross on an Ichimoku chart. And third, the logarithmic 50% Fibonacci level is at 6806.

The flash crash Bitcoin has experienced today may be a massive bear trap. In fact, when we review the behavior that price commonly experiences in a symmetrical triangle formed in an uptrend, we see these drops almost always turn into wonderful buying opportunities and generate massive short-covering rallies. This is all occurring against the 90th day of a 90-day Gann cycle of an inner year – expect some crazy moves for the remainder of this week!