Weekly pressure continues to be bearish. Faster time frames show minor bullish conditions.

 

Higher lows and higher highs

Bitcoin has been trading inside one of the most extended and most constricted trading ranges of 2019. And while Bitcoin has continued to trade in a healthy bearish continuation pattern, a bear flag, it has continued to create higher highs and higher lows. The current significant swing low is at 7701 and was made on September 30th. The next higher low was made on October 7th at 7762. The highs of this current bear flag have been at 8535 and 8826. We can also see that the 38.2% Fibonacci level has been the primary support level since the flash crash on September 24th. The price action around this particular Fibonacci level is important. One of the critical components of locating evidence of accumulation is a series of wicks or shadows piercing a vital support level. There have been nine trading days where price has moved below the 38.2% Fibonacci level at 8050 only to move back above. I find the first five daily candlesticks of particular interest because the open and the closes are right on top of that specific Fibonacci level. The combination of higher highs, higher lows, and accumulation at a critical support zone are natural bullish conditions. But the broader outlook is still bearish.

I am still looking at a drop lower towards the 6800 value area. The top of the weekly Kumo is at 6500, and the 50% Fibonacci level is at 6800. The current week’s candlestick is an inside bar. Inside bars are candlesticks where the high and low of the candle trade entirely inside the high and low of the prior candle – in other words, last week’s candlestick has a higher and a lower low than the current week’s candle. Inside bars do create many strong trading signals, and many popular strategies involve inside bars. If we were to create a short idea for the current weekly chart of Bitcoin, then we need to consider the overall trend first. While it may seem a little out of place given the past 3+ months trading, the trend for Bitcoin is inherently bullish. For a short signal to trigger the current inside bar, price would need to drop below the prior weeks low, which is at 7762.35. However, given that the current significant swing low is less than $100 below last weeks low, it is probably more prudent to wait for a new swing low to appear.

Any break below the 38.2% Fibonacci level at 8050 would more than likely create a substantial and rapid descent in price. There is a high volume node in the present value area, and the next high volume node is right in our target zone of 6500 to 6800. If the break of the two support zones near the 38.2% Fibonacci level isn’t bearish enough, the break of the high volume node is exceedingly bearish. Because there is a thinly traded zone between 8000 and 6500 in the volume profile, that space acts as a sort of vacuum and sucks price from one high volume node to the next. If the drop does occur, at least it won’t be drawn out and painful.