I recently posted that cryptocurrencies will find a trend reversal between June 22nd and July 7th. On the way to any trend reversal, there are generally three stronger resistance zones that get tested on the initial leg in that trend change. It’s important to identify those initial zones on that first leg because they often act as traps for opposing the side of the traders.

For the purposes of this analysis, I will be using Bitcoin’s Gann square of 144. I actually have 3 different Gann Squares I utilize for Bitcoin and Bitcoin seems to be equally sensitive to all of them and their own particular geometry. The 144 Square though seems to show a more accurate representation of the three initial resistance levels that Bitcoin needs to breach in the near term.

 

First Key Level: 6301.96

The 6301.96 value area represents a very important level to cross and hold above. It is the inner harmonic of the two major harmonic price levels of 7562.13 and 5041.75. The middle harmonic value areas provide the hardest support/resistance between major harmonic levels, so there should be some significant battling that goes on there. We may be witnessing that happening right now. We also need to observe what happened over the weekend on Sunday at the new yearly lows put in (a whole hundred bucks lower than the Feb low). Price bounce off of the 1.13 Fib level. It might be a stretch to say it test the angle below and the inner harmonic pivot of 5671, but certainly not a stretch to say that Bitcoin bounced off that 5671 value. A break and hold above the 6301.96 value zone on a daily chart would provide a good base to knock out the next levels. Additionally, the angle above is the 1×2 angle and we are trading below that. That angle tells us that we have moved twice as fast in price related to time. Generally, we get violent ‘snapbacks’ to the 45-degree angle.

 

Second Level: 7248.77

The second value area is the 7248.77 zone. This brings us beyond the long-term Fibonacci swing level of 0.786, the short-term 0.886 Fibonacci level. More importantly, it brings us back into a steeper bullish Gann angle. A break and return to that angle would cause us to follow the Rule of Angles in Gann’s analysis: When price breaks and angle, it will move to test the next. Not surprisingly, that angular test brings us to the 10,000 value zone. The next level is the first strength test between 7300 and 7200. A hold at this level brings us to the most important in this 3-step move: 7562.13

 

Third Level: 7562.13

Out of three price zones, this is the most important. 7562.13 is a Major Harmonic price level. Any major harmonic is going to be the most difficult area to cross above or below. The trading on that level and then below has been… weak. The price action has been distributive, there is no doubt! But the participation? Lackluster at best. In fact, we are now in our eighth week of below-average volume. But this major harmonic is not the only reasons why it’s important. This would also put is within spitting distance of the next Gann angle and a higher trading range, certainly near and/or beyond the $10,000 value area.