Around this time last week, the situation was looking increasingly dire for Bitcoin (BTC) and murmurs of a drop to $6,000 and even $3,000 began to circulate amongst traders. Even today there are still those that consider this a real possibility and perhaps it is. For the moment, Bitcoin appears to have stabilized and traders are hopeful that a strong move to $8,500 will occur over the coming days.
Where are we going?
Since the drop from $10,300, Bitcoin has been pinned in the $8,000 to $8,400 range with support at $8,000 and $7,850. The digital asset formed a double bottom at $7,715 then crawled above the 20-MA of the Bollinger Band indicator. At the time of writing the 12 and 26 exponential moving averages (EMA) are in the process of converging on the 4-hour chart.
The last two attempts to make a strong upside move were capped around $8,520, possibly the result of volume continuing to taper off as the Bollinger Bands tighten.
One can see that Bitcoin price has ridden right along the MA of the Bollinger Bands and met resistance once breaking above the upper arm in the $8,520 area. The digital asset is still closing below the 200-MA at $8,736 and this point is still acting as resistance.
Bull, bear or chimera?
BTC/USD 4-Hour Chart. Source: TradingView
The Stochastic RSI (Stoch) has a bullish cross on the 4-hour and weekly time frame but similar to guidance from other analysts, the current state of the short-term versus longer-term time frame MACD provides a conflicting view of Bitcoin’s overall price action. Like the Stoch, the MACD on the daily time frame is slowly curving up toward the signal line but the reading on longer time frames is less than inspiring.
BTC/USD 4-Hour Stoch RSI. Source: TradingView
Generally, one can surmise that Bitcoin is attempting to restore some of it’s lost territory in the short term but the longer time frame indicators indicate a bearish bias.
There has been much talk about the importance of the 200-MA and while it is an important point that Bitcoin should stay above when in a bull market, traders might also focus on the 111 daily moving average (DMA).
BTC/USD Daily Chart. Source: TradingView
The 111 DMA and middle arm of daily Bollinger Band nearly align and a trend reversal is better spotted at $9,500, rather than the 200-MA which is merely an overhead resistance at this time.
Philip Swift’s 2-Year MA multiplier and his Bitcoin Golden Ratio Multiplier show Bitcoin's current price action is nothing out of the ordinary and while no-one can call it, a bounce from the 2-year MA is bound to happen at some point.
A drop below the 350-DMA seems unlikely but if this were to happen it would most likely lengthen the current accumulation phase.
Bitcoin Golden Ratio Multiplier. Source: Philip Swift
Intraday traders watching the 1-hour chart will notice that BTC’s attempts to break above the Bollinger Bands led to repeat visits to $8,528 followed by 24-hours of lower highs.
BTC/USD 1-Hour Chart. Source: TradingView
A third failed attempt to surmount $8,528 could be the final straw that sees BTC drop below the 20-MA on the 4-hour Bollinger Band and price could drop to $8,175 or the local bottom at $7,720.
Bearish outlook
A drop below the lower Bollinger Band arm at $7,338 is likely to raise concern and the volume profile visible range (VPVR) shows limited demand in this area. While many abject to this assessment, a drop below $7,300 opens the doors to a potential visit to $5,700 where interest for BTC is shown on the VPVR.
Of course, there is always the possibility that bulls front-run Bitcoin price before it drops this low but similar to any asset, nothing can ever be assumed and nothing is ever guaranteed.
Bullish scenario
In the short-term, traders would like to see Bitcoin overcome $8,760. A really exciting move and confirmed change of trend would be a move above the most recent high at 9,785 but perhaps that a bit of wishful thinking.
BTC/USD Daily Chart. Source: TradingView
A move to $9,000 would bring Bitcoin back above the base of what was once a massive descending wedge at closer the 20-MA of the Bollinger Band indicator which is currently at $9,200.
Ideally, a high volume spike form bulls would help Bitcoin break through $8,500, above the 200-MA at $8,736, then possibly halt at the 20-MA at $9,200. A short period of consolidation along this MA followed by further continuation to set a higher high at $9,783 or even $10,556 would then be the next steps to look for.
A move to $10,400 would put many traders back in the black and restore hopes of retaking $11,000 but there is plenty of work to do before reaching this point.
In summary, Bitcoin appears well situated above $7,800 and alarm bells should go off if it dips below $7,300. Continued rejection at $8,200 and $8,500 could increase the chance of Bitcoin falling below $7,300 to the $6,500 to $5,700 range.
Few want to see this outcome come to play but it would provide another opportunity to load up on some cheap Bitcoin. Given Bitcoin’s bearish bias, using a stop loss would be wise and traders might consider waiting for a confirmed bottom before opening leveraged long positions.
The views and opinions expressed here are solely those of (@horushughes) and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.