Just like Maverick and Goose in Top Gun, BTC is flying right into the danger zone today. Although this is likely to be painful in the short-term, this is actually what the market needs to start thinking about forming a proper bottom.
So, aviators on, let's take a look.
Yesterday's move down was on unusually high volume - especially intraday, with most of the move happening in a single 4 hour spike down. This is the most volatility we've seen for a while. Bears have armed their missiles.
This has moved BTC right onto the upper blue dashed line that has been acting as our main support since the December top. With price compressing to the downside we can draw any number of descending triangles onto this chart (flat bottom, sloped top), giving this a bearish tint indeed and putting pressure on that support.
Over on the right I've added a colourful 'volume profile' indicator, showing volume traded at each price level historically. This allows us to see zones of support and resistance below this support level clearly. As you can see there was very little trading volume in the area just below. If, as I suspect that gives way and we enter the marked 'danger zone' we're likely to see fast moves and some panic.
High volume panic bottoms, ironically, are where capitulation and hence long-term bottoms are born, so ironically I see this as something the market needs to do to move higher.
Supporting the bearish case, RSI (just under rate main chart) has rejected the 50 line, and MACD has crossed bearish again.
Targets for such a move would be the former downtrend (green), then historical price-level support at $4637. Excitingly this would accord with the Death Cross target, and put us into our very long term uptrend channel (marked in purple here), which is where I'd be comfortable starting to build a bullish case.
What case could the bulls make here meanwhile? Well RSI is oversold, and we're still above that blue support level. Otherwise I fear they need to watch their sixes.
Since BTC will likely dictate the next move for all the coins, I'm focusing on how the 'danger zone' looks on the other coins today. On ETH the gap is down to around $350, which would be next support. Note that ETH is still above its 50 week moving average (yellow) giving bulls cause for hope - but also has the same RSI and MACD bear signals flashing.
As I discussed last week the danger zone on Ripple is a bit epic. I'd expect a swift move down to $0.27 on a BTC break of support.
LTC has now broken its 50 week and unlike the others is slightly below support already. Its danger zone is small however, with target support at $74.
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Strategy and Execution Partner
Jon is MD of British music production company Poseidon. He began studying technical analysis in 2000 for use in managing his own investments and due to its overlap with behavioural economics – much used in Poseidon's international marketing work. This has seen the company achieve three iTunes US number one albums in as many years among other notable successes.
A Bitcoin investor since 2013, Jon and has been providing Technical Analysis (TA) commentary for a private community of Cryptocurrency investors since mid 2017.