Bitcoin Price retreated to yesterday's lower target near $373 and is now gearing up for a return to $400. In choosing the lower target, the market has pushed price back below several important moving averages. A longer consolidation may now be on the cards. Global…
Gold relinquished $1,250 and is currently trading sideways near $1,234. The S&P500 has rebounded to 1,880 and the US Dollar is battling with divergence and remains between trends 85.17
Time of analysis: 12h00
Yesterday it was pointed out that a preferred reversal level for the correction would have been $387. Turning at that level would have maintained some of the upward momentum of the advance to date. However, in targetting $370 in a messy correction, the market has foregone the upward price momentum, as well as, losing ground above the 20MA and 200MA in the 4-hour and hourly timeframes.
Bitstamp Hourly Chart
Although a waste of time and momentum, the correction from $417 to $370 is understandable. Many participants are still nervously expecting a bear to jump out the woods, and solid confirmation of a trend change has not yet been printed in the technicals of the price chart.
$400 will most likely now be a stronger psych level and present more formidable resistance. Of course, it can be beat in one punching move to the upside but there are a lot of knocking knees out there and nervous traders will want to exit longs until they’re sure that they’re sure about the upside. Failing a surge above $400, it would be reasonable to expect a consolidation just below $400.
Regarding additional downside, notice the extent of reverse divergence in the hourly Bitstamp chart. The reverse divergence between price and both RSI and MACD is shown in solid blue lines. According to the hourly chart RSI, price should now be at a lower level than the decline low of $275 – but it isn’t – so any additional RSI low can only reasonably occur on a flash crash below $275. An additional price low is possible, but it will immediately cause RSI divergence and force an uptrend.
The 4-hour chart is reverse diverged in a similar way – as is the weekly RSI and MACD. The daily chart has room for advance, so this is where the path of least resistance lies.
The larger trend remains up, but a sideways consolidation is likely before advance can proceed. $400 is an immediate target but may resist advance and force price sideways for a few days. If price surges above $400 without being pulled back below it, then expect strong advance.
For the reasons discussed above, additional downside is unlikely. However, if the bears try it, they are limited to one more wave of decline to $360.
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Last modified: January 10, 2020 2:43 PM UTC