Bitcoin reversal insight
When Bitcoin went over the edge and into the $14,000 are a couple days ago, we had a good recovery but have failed to move back into the highs. Interestingly, one of the reasons for the big move and correction in Bitcoin may have been due to some supposed insider trading at Coinbase with the release of Bitcoin Cash.
If you take a look at my prior analysis of the Bitcoin dump, we can see that the farther arc (purple) has maintained a strong area of resistance in price.
The price movement here has been interesting, as well as being a great example of how price responds to natural structural. The purple arc is proving to be a tough nut to crack for Bitcoin, but we are finding supportive buying and structure the further price goes.
We have a number of scenarios that are forming to sprint Bitcoin higher.
- Time – the verticle black line represents the end/start of a daily time cycle that Bitcoin is sensitive to. Right on top of this area is an additional confluence of a time cycle: a Fibonacci time cycle.
- Oversold conditions on the oscillators. When we have an identical visual structure of the RSI (Relative Strenght Index) and the CI (Composite Index), we have an extremely high probability of price reversal and confirmation of a bottom.
- We are the bottom of a channel. The support area at $15,000 is right in the channel zone.
How the price action may play out
There are two scenarios at play here, both with equal weight in their probability.
- The first scenario is a slow churn to the top of the channel before a strong breakout above the purple arc. This would return us not only to the $18,000 area, but will propel Bitcoin well above the $20,000.
- The second scenario is a continued move south to the $15,000 support line and towards the end of our time cycle. We should remain in some normal to extremely oversold areas on both of the oscillators. A swift reversal off the time cycle should be expected.
If none of those cycles playout, we can expect price to return to the $13,331, which is the midpoint of price for Bitcoin. That level is actually the strongest support area for Bitcoin. Be careful of your trades at these zones and use the oscillators to confirm your entries. Watch for neutral levels if, at these zones, those can be dangerous indicators that price will break down further.