Major confluence support zone for Bitcoin at 5041.75
I trade the futures markets, mostly equity futures and mostly the NQ (Nasdaq) and some of the YM (Dow). I’ve dabbled a little with the Bitcoin futures, but I really see no point in trying to trade those contracts. However, it is odd how much the Bitcoin futures market seems to have a greater influence over the spot market. Generally, the derivative follows the instrument/contract it represents. For instance, the Nasdaq futures contract moves in concordance with the actual performance of the Nasdaq Composite Index. And all futures markets have expiration dates. And on those dates, depending on the market, there are often volatile changes in trends and increases in volume. For Bitcoin, that happens very soon.
On August 15th, 2018, the CBOE (Chicago Board Options Exchange) XBT (Bitcoin futures contract) contract expires and rolls-over into the next 3-month contract. It will be interesting to see the open interest and positioning as we enter the final quarter of the year for both the CME and CBOE Bitcoin futures. It’s not surprising we’ve seen a thrust down in price prior to the weekend that precedes an expiration week. What is exciting is the position of Bitcoin and the current technical levels.
The highlighted box on the chart represents a strong confluence area of natural support. The 5400 value area is also the 0.882 Fibonacci zone between the momentum trend swing back in 2017 to the all-time high made last December. That Fibonacci level is a strong reversal zone and in certain Gartley patterns, that Fib level represents some of the most profitable patterns in trading. Additionally, we have the Major 2/8th harmonic at 5041.75. I really need to emphasize the power of that level. Both the 6/8th and 2/8th Harmonic levels represent the strongest areas of trend rejection on a chart. They act as pivots against the prevailing trend. Since Bitcoin has been in a downtrend over the last 9-months, the natural response to price coming into this zone is for a violent rejection. This probability is compounded by the confluence of Gann angles in this Square of 144. We have a higher probability of trading down to this range than we do finding a relief rally because we have broken the Gann angle above and we must follow the ‘Rule of Angles’ which says that if price breaks an angle up or down, price will move to test the next angle. And that next angle is in that 5042.75 value area.