The bitcoin price on Monday depreciated as much as 4.74 percent against the US dollar after breaking out of its two-week long consolidation period.
At 20:00 UTC on Coinbase, BTC/USD was trading at $3,415, down 3.31 percent from today’s opening rate. The pair confirmed a downside break of its near-term bearish pennant formation. As it did, it also broke below a crucial support level at $3,460, which had capped a strong downside action on November 25, 2018.
Technically, the breaking of a bear pennant formation to the downside signals an extended selling action. It eventually leads to a bear flag formation. In recent days, the bitcoin market was in a brief pause, and its sudden reassertion in the direction of the previous trend marks the beginning of another bearish cycle. Should it happen, the bitcoin market will attempt to form a double bottom above $3,000.
Meanwhile, the Relative Strength Indicator (RSI), also dipped below 40, which is considered a robust selling region. In the worst case scenario, the momentum indicator could go below 30 – an oversold territory – before correcting higher to form lower highs.
Bitcoin’s 50-period moving average curve (depicted in blue) has been capping the upside attempts since November 2018. Therefore, on a jump from the next support, breaking above the 50-period curve on the daily charts could establish a durable floor for the next uptrend – whenever it comes.
For today, the bitcoin price trading range we are watching is defined by $3,466 serving as interim resistance and $3,374 as tentative support. Though a narrow range, it provides us with decent intrarange opportunities to kickstart the day. That said, we are first entering a short entry towards interim support while maintaining our stop-loss order at $3,431.
On a bounce back from $3,374, and if the volume indicator goes strong as well, then we will open a long position towards $3,466. Similarly, a pullback from $3,466 would have us open a short position towards $3,374. As we play on these interim trend reversals, placing a stop loss 1-pip against the direction of the trade would minimize our risks.
In the event of a breakdown action, such that bitcoin breaks below $3,374, we will open an extended short position towards $3,219 (visible in the 1D chart above). A stop-loss maintained just 1-pip above the entry position would define our risk management strategy.
Conversely, a breakout action, such as if bitcoin breaks above $3,466, would allow us to open a long position towards $3,523, our upside target. We will maintain a stop loss 1-pip below the entry position to ensure we exit our trade on a small loss in case the bias reverses.
Featured Image from Shutterstock. Charts from TradingView.