The Bitcoin price hit a local top of $87,400 on Monday after another short but powerful rally out of a bull flag that added another $6,000. A pause is in force currently as this latest move is digested by the market. With the $BTC price now quite overbought, how far down could this corrective phase go?
New bull flag or lower correction?
Source: TradingView
The 4-hour chart shows the latest powerful move by the $BTC price as it exploded out of the parallel channel it had been in since the latter part of August. Having almost touched $87,400, the price is now in a corrective phase and it just remains to be seen how far down this will go.
It may be that the price doesn’t go down much further and that it starts to chop up and down, forming another bull flag as it goes. That said, the $BTC price is quite overbought and some kind of decent corrective movement probably needs to occur.
Looking at the Fibonacci retracement levels it can be observed that they appear to be working well, aka the perfect candle changeover at the 0.236 level. The 0.382 would probably be the first possibility of a bounce, although that could be too bullish, and too soon. Momentum indicators need to reset and so we may have either the bull flag thesis, or a deeper corrective movement.
Going all the way down to the 0.618, the golden level, it can be seen that it matches up with support, and this support just happens to be where the last macro higher high is situated. Could the $BTC price come back here to test and then confirm this level as new support? If the price came down quite quickly it could also retest the support of the ascending trendline.
Fibonacci suggests next staging post at $89,285
Source: TradingView
The Fibonacci retracement levels also work their magic in the daily time frame. This time starting at the top of the first big bear flag at $97,860, and drawing down to the very bottom of the bear market at $57,800, we can see that the 0.618 level lines up closely with the top of the second big bear flag, which was surpassed on Monday. Then the 0.786, the highest of the Fibonacci levels, matches a strong support and resistance level at $89,285 practically perfectly. Therefore this is probably going to be the next staging point.
Trend change after 39% rally so far
Source: TradingView
The weekly time frame illustrates the big trend change now that the $BTC price has gotten above the bear market local high of $82,800. This is only the start of the 6th week of this rally and already the $BTC price has climbed 39%, equivalent to a gain of $24,550.
The price cut up through the 50-week simple moving average (SMA) and a weekly candle has opened above. In terms of a new bull market this is huge, given that once the price breaks through this barrier, it normally confirms the new bull market with the price then holding above the 50-week SMA and holding it as support for the entirety of the new bull phase.
Finally, just to once again show the reliability of the Fibonacci levels, it must be noted that the Fibonacci levels, drawn from the top of the last bull market to the bottom of this bear market, show the 0.618 Fibonacci sitting at almost exactly $100,000. While this isn’t particularly at any major level of resistance, the round number of 100,000 makes its own resistance. The market will respect this figure so expect some selling when the $BTC price arrives there.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
