by Jamie Holmes
Sellers were only able to push the price as low as $374.45 on the Bitstamp exchange once the price action closed below the Ichimoku cloud on January 22nd. Buying interest at these levels saw BTC-USD pick-up again and head above $400 momentarily. A second attempt by sellers in the market to push the price lower is currently underway.
Action from several central banks this week could see high volatility in bitcoin markets; on Thursday, the Federal Reserve will release its interest rate decision and accompanying monetary policy statement. If their assessment is pessimistic then this should be bullish for BTC-USD. Also, the Bank of Japan meets on Friday and could state its intention to further its quantitative easing program; if this occurs, then it would signal a positive fundamental theme for Bitcoin going forward.
The medium-term outlook is shown in the 4-hour chart below. This morning the price action moved below the Ichimoku cloud again and has since crossed below the conversion line, giving a strong bearish signal. Also, the cloud has changed colour from green to red validating a bearish outlook as well. Sellers should look to push the price to fractal support at $381.05 and a break below this level should see a move towards support at $374.45. A move below this level should see a test of $350.
The most recent sell fractal is at $405.97 and a break above this level is needed to validate a bullish outlook. Similarly, a close above the conversion line, currently at $395.73, should also see bullish momentum dominate. The cloud will act as resistance going forward, just below $400. A session close above the cloud will see a test of $420-$430.
The relative strength index indicates that there is more risk to the downside as the index has recently crossed below 50 and is not near the oversold region just yet. Sellers should look to keep their short trades until the relative strength index starts to push below 30 and enters the oversold region. Buyers should look for a move above 50 to look for potential entries into long positions.
The short-term outlook is shown below in the hourly chart. For the preceding hourly trading session, a long-legged Doji candlestick pattern was formed which indicates that the price may be currently finding support in the area of the Ichimoku cloud. However, a bearish outlook is suggested by the Ichimoku cloud, which is changing colour from green to red. Moreover, the base (dark-red) line is trending above the conversion (blue) line and both offer resistance going forward. Finally, we are also below the most recent buy fractal indicating bearish momentum will continue. A close below the Ichimoku cloud should see the price test fractal support around $380. On the other hand, immediate resistance is provided by the fractal at $399.77 and $402.12. A break of these levels should see buyers push the price toward the recent high at $405.97.