by Jamie Holmes
Bitcoin has exhibited fresh lows not seen since November 2017, swiftly breaching the $10,000 and $9,000 psychological levels on February’s first day of trading.
With January behind us, the trading charts provide new monthly candlestick formations. The chart below shows that BTC-USD displayed a fade (brown) for the first month of trading in 2018 according to the Market Facilitation Index (MFI), suggesting the uptrend is exhausted. Also, while January’s close was above the short-term equilibrium, as indicated by the Ichimoku‘s base line (red) at $10,007.32, the market has since moved back below this crucial balance point, opening up room for further downside.
If by the end of February, $10,007.32 is not regained, then the long-term outlook is bleak. On the other hand, if the price manages to rise back above the base line by February’s close, this is the only thing that could provide a bullish outlook going forward.
BTC-USD, Monthly (Bitstamp)
Many buyers are waiting around the $8,000 handle according to a number of peer-to-peer traders. The chart above paints an even damper outlook. With 11 near consecutive higher highs recorded over 2017, we now see two near consecutive lower lows, meaning bears are beginning to take hold of the market.
Let’s assume we will see 11 near consecutive lower lows, at the earliest we expect bearish exhaustion in January 2019, at latest September 2019. Once we observe 11 near consecutive lower lows, then we can be certain that the long-term momentum will switch in favor of bulls in the market and begin to enter long positions.
Another case could be a negation of the ‘near consecutive’ count with three months of no new lower lows (for instance, March through until May, February’s low is not breached). If there are three months in a row with no newer low, the count is restarted, which may occur around the Fibonacci supports highlighted above. After breaking below $10,065.64 on February 1, the only remaining supports lie at the 38.2 percent retracement level ($7,799.96) and the 23.6 percent retracement level ($4,996.65).
The Ichimoku indicator signals support much lower at $4,326.09, as shown by the trough of the lagging line (purple). Currently, the MFI for February’s candle is a fake (blue), suggesting large players are trying to manipulate the market. A fake is displayed when the market facilitation index is increasing but volume is decreasing, suggesting that no new volume going into any positions. What does this mean? Well, don’t enter the market into any new positions until; the MFI changes color or the month ends with a fake and await the next month open.
The monthly chart throws up some uncomfortable possibilities for bitcoin holders, and with no move back above $10,000 before February, the fate is sealed and the markets are likely to move much lower.
From a different perspective
The weekly chart below shows that we have already seen three near consecutive lower lows since the first week of 2018. On this timeframe, we don’t see any exhaustion from bears until March 26, 2018, while at the latest, we should see a reversal in the weekly trend by July 23, 2018.
BTC-USD, Weekly (Bitstamp)
This week’s candle looks to close below the base line (red), giving a weak sell signal. The only Fibonacci support left is at $6,911.79, while the lagging line (purple) indicates support zone much deeper at $5,870.37.
25 percent Wiped from Bitcoin’s Value in Four Days
Looking at the daily chart below, we see that bullish dominance faded after going below $11,676.99, the open of the large green candle from December 6. After successfully holding as resistance in the past few days, we see that a move to the fractal lows at $5,555.55 and $5,101.36 is on the cards.
With the market price reaching fresh lows at $8,455.00 on February 1, bitcoin’s value has plummeted by more than 25 percent in the space of four days.
Notice, that when bulls dominated, the trading range was roughly between $11,676.99 and $17,428.42. A similar range may be observed for the downside, with support likely to be found above $5,000, although a fractal support does stand in the way at $7,876.00.
BTC-USD, Daily (Bitstamp)
According to the count for the daily chart, we see that four near consecutive lower lows have been made since BTC-USD closed at $11,685.58 on January 28. Therefore, the downward trend could extend until February 8, or at latest, until February 19. Once we observe around 11 near consecutive lower lows, we can be sure that the sellers have been exhausted, and build support for a new upward move.
In summary, there are many potential scenarios going forward. Most importantly, if the $8,000 handle does not remain intact (likely to be tested in the coming week), then we expect further freefall, with important support zones at $7,799.96, $6,911.79, $5,870.37 and the $5,000 handle. On the other hand, a weekly close above $9,349.11 could provide a sustained reversal and see an attempt at $10,000 once again. Bitcoin holders can look forward to better months ahead, if the $10,000 handle ($10,007.32 more precisely) is regained before March 1.