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Bitcoin Testing Multiple Resistance Zones, While Potential Bearish Flag Emerges on Daily Chart

  • April 20, 2020 03:38 PM AEST
  • Team Kalkine
Bitcoin Testing Multiple Resistance Zones, While Potential Bearish Flag Emerges on Daily Chart

Cryptocurrencies like other asset classes is under the COVID-19 weather. Bitcoin, which is the largest cryptocurrency by weight extended a decline from the level of USD 10,489.00 (intraday high on 13 February 2020) to the level of USD 4,001.00 (intraday low on 13 March 2020), marking a fall of ~ 61.85 per cent.

Gold MTF non-AMP

However, post the fall the recent decline in USD has somewhat supported the bitcoin price in the market with price recovering from its recent low of USD 4,001 to the present high on USD 7,300.1 (intraday high on 18 April 2020), up by ~ 82.45 per cent.

To know how USD is poised in the status quo, Do Read: Beleaguered Economy Yet Strong Currency, USD Poised to Embrace the Projected Deflation?

Bitcoin on Charts

  • Bitcoin On a Monthly Chart

BTC on a Monthly Chart (Source: Thomson Reuters)

BTC on a Monthly Chart (Source: Thomson Reuters)

On the monthly chart, it could be seen that the currency has corrected ~ 78.6 per cent of the primary upside rally, which started from ~USD 116.26 and reached a peak of ~ USD 19,486.63. The pair of short-term exponential moving averages, i.e., 9-month and 21-month are showing a positive cross with decent volume gain, which coupled with above mean 14-month Relative Strength Index (or RSI) and slight increase in Average True Range, reflects accumulation phase of the correction.

BTC on a Monthly Chart (Source: Thomson Reuters)

BTC on a Monthly Chart (Source: Thomson Reuters)

On further identifying the long-term support and resistance level, it could be seen that on a monthly timeframe, the currency is surging to test the long-term resistance zone (red line), which would be the immediate resistance level for the currency and is at ~ USD 7,864.41.

Also, it should be noticed that the currency is now consolidating within the band width of its resistance and support line (green line), which is at ~ USD 5,764.44. The currency fell in response to the spike in dollar prices; however, did not make a new low, which suggests that the primary trend is yet intact.

The previous low on the chart, should be the major support level (yellow line), below which the correction could confirm the change in trend, till then, the primary uptrend should be considered intact.

The Fibonacci Series from the wave point marked as 0,1, and 2, which as per the theory suggests potential target with major resistance around 50.0 per cent and 100.0 per cent projected level is depicted on the chart and should be monitored for astute judgement.

  • Bitcoin On a Weekly Chart

BTC on a Weekly Chart (Source: Thomson Reuters)

BTC on a Weekly Chart (Source: Thomson Reuters)

On the weekly chart, the currency is taking the support of its long-term support line; however, trading below Span A (which is the mean value of the conversion line (dark blue) and the base line (sky blue). The Span A is now trading below Span B (which is the mean value of 52-week high and low) to form a grey cloud, which would be the resistance zone for the currency.

Also, the conversion line (mean value of 9-week high and low) is showing a negative crossover with the base line or mean value of 26-week high and low, reflecting that the ongoing momentum is on a weaker footing.

The 14-week RSI is behaving in tandem with the price and is below its mean value.

The spread between Span A and Span B is somewhat enlarging suggesting that the current resistance zone contain some weight, and investors should monitor the currency around the grey cloud as a break and sustain above the same with decent volume could suggest the continuation of the primary uptrend, and failure to do so could mark the continuation of the ongoing correction in the currency.

BTC on a Weekly Chart (Source: Thomson Reuters)

BTC on a Weekly Chart (Source: Thomson Reuters)

On applying the Bollinger band it could be seen that the currency is now testing the mean value of the band with low Detrend indicator peak (as compared to the previous peak) or the price oscillator, suggesting that bulls are still activated around the present level.

A break and sustain above the peak usually takes the price of the underlying asset to the upper band, at least in theory. The lower band should act as the immediate support level, while the mid and upper band should act as the intermediary and primary resistance, respectively, for the currency.

  • Bitcoin On a Daily Chart

BTC on a Daily Chart (Source: Thomson Reuters)

BTC on a Daily Chart (Source: Thomson Reuters)

While on other mid- to long-term timeframe, the currency is trading at crucial level and trying to test the resistance, the daily chart is showing a potential bearish flag pattern, which is yet to give confirmation and a downside breakout.

The average true range of the currency is moving downwards, which with a recovering Detrend suggests loss of upside momentum around the present level.

The primary resistance for the currency on the daily timeframe is at ~ USD 8,446, while the intermediary and major resistance would be at ~ USD 9,947, and ~ USD 11,805, respectively.

The short-term support for the currency would be at lower line of the potential bearish flag, while the major support would be at the previous long-term low or around ~ USD 3,000.

The COVID-19 saga has changed dynamics across various asset classes. Bitcoin is in a very interesting testing phase with talks of de-globalisation doing rounds. Closer look at chart patterns and developments around the global front could be warranted now.


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