The Bitcoin-to-USD exchange rate is trading lower on Thursday, on track to restest its bottom area below 6000-fiat.
The pair is trading down 5.05 percent to 6195-fiat, after recovering from its intraday low near 6045-fiat, after spending two weeks in a sideways consolidation range, awaiting breakout. Bitcoin’s inability to breach through a medium-term descending trendline, coupled with International Monetary Fund’s negative stance on digital currencies, could have attributed to the losses.
So far, Bitcoin price action is still in sync with its medium-term descending triangle, which is getting the status of meme triangle among Bitcoin speculators. The support is still tightly held by strong technical, as well as fundamental factors. Hedge fund managers believe $6,000 is Bitcoin’s bottom – a level that also coincides with miners’ break-even ROI. At the same time, price action in recent months has witnessed pullbacks to the upside from the same level.
The bear flagpole formation is hinting a pennant action in coming days, moving from large volume consolidation action to low volume consolidation action. The intraday volatility could allow traders to enter a short position just below the pennant’s lower trendline, with a downside attraction towards 6000-fiat. We are thinking a downtrend because of the prevailing bearish bias in medium and long-term. The RSI, which indicates the momentum, is also hinting a visit to the oversold area. The same can be said for the Stochastic Oscillator which has its head towards the south.
The Bitcoin drop has brought us near September 8 lows, which held the downtrend from extending. Therefore, we are expecting BTC/USD to find a reliable support near 6154-fiat while 6395-fiat is capping the correction as resistance. We are not hoping to enter a long position on lower lows formation but instead will wait for a confirmation of pennant formation to understand our long/short intraday positions.
Nevertheless, a close below 6141-fiat will have us enter a short towards 6000-fiat, our primary downside target while maintaining a stop loss just 4-pips above the entry point. An extended breakdown action could put price inside a free fall towards 5788-fiat on panic. But, it would also mark an ideal time for bulls to recapture attention and initiate a wild upside swing towards the descending trendline formation on daily charts.
Featured Image from Shutterstock. Charts from TradingView.
Last modified: May 20, 2020 5:09 PM UTC