by Jamie Holmes
BTC-USD’s astonishing bullish run managed to reach our target of $710, posting a fresh high at $725 on the BitStamp exchange. However, after such a swift and colossal increase from $580 to $725, the market is now undergoing a healthy correction which could extend as low as $635. The price currently stands at $677.90, down 3.77% on today’s opening price.
The chart below shows the short-term outlook for BTC-USD using the hourly timeframe. Firstly, bearish momentum is in play at the moment, as indicated by the crossover of the base (dark-red) and conversion (blue) line; the base line is now trending higher suggesting momentum will be more weighted to the downside. Also, the conversion line is starting to trend downward, and a change in the color of the Ichimoku cloud looks imminent. Currently it is green, but if it turns red then we should anticipate further moves to the downside. Finally, the most recent fractal buy level at $684.22 has been broken, which further confirms bearish momentum over the short term.
On the other hand, buyers are suggested to remain in control at this timeframe as the price action has not yet pierced below the Ichimoku cloud. The cloud provides support in the area $688-$652 and a breakout in either direction is possible going forward. If the market fails to break below the cloud just above $650 then short-term dominance will remain in the hands of BTC-USD bulls. Otherwise, we could see BTC-USD extend as low as $636.24 and $619.04, important fractal support levels.
The longer-term outlook is illustrated below with the 4-hour price action. The previous 4-hour session closed below the conversion line, providing a weak bearish signal; the conversion line will now act as resistance, currently at $690.35. The conversion line acts as an ideal entry into short positions for BTC-USD. The market now looks to be tending toward the base line at $649.25, which should act as support. If the market manages to establish a 4-hour session close below the base line then we could see the downward move extend much further than $635. On the other hand, if there is no 4-hour session close below the base line then this could act as a good buying opportunity, as the price action is still above the Ichimoku cloud at the 4-hour timeframe.
The most recent buy and sell fractal levels are shown on the chart with the yellow rays, at $655.79 and $725.00 respectively. Whether or not there is a 4-hour close below $655.79 will be critical to determining the future path of BTC-USD going forward. When and if this fractal level breaks we should see bearish momentum intensify and see the market attempt to test the $600 psychological level; in fact, the next recent fractal support after $655.79 is at $575.05, suggesting a lot of potential to the downside when $655.79 is broken. However, if the market manages to move below this level but not establish a close below $655.79 then we should see a continuation of the preceding upward trend.