Yesterday, the cryptocurrency world experienced a shock-wave. Bitcoin’s value crashed dramatically, throwing us back into a significant horizontal trading range. This article examines the crucial within this range and highlights the next vital Fibonacci price target should we witness an extensive break.
Identifying the Horizontal Range
Our primary task is to pinpoint the exact spot of this horizontal range. Using the 4-Hour timeframe, start by formatting our parallel channel. Connect the preceding highs and widen it slightly towards the downside. Notice the distinctive resistance area and the precise support area resembling Bitcoin’s almost markedly respected regions.
Although there was a deviation from the horizontal range following an upward thrust, it’s important to remember that the market isn’t perfect. This minor discrepancy does not invalidate the precise horizontal range.
Pinpointing Important Levels
Next, measure the full upper price division of the range using the volume. The point of control and the value area high are approximately $44,000. These volume levels are very close to the top of our horizontal range, around $44,500. Considering the current order flow, it seems a large number of people are starting new short positions around this area, thus pushing the price higher. Consequently, Bitcoin has a high probability of retesting the value area high and point of control within its significant horizontal range.
This brings us to a critical question – what happens if Bitcoin retraces back downward after experiencing rejection at our volume levels? What are the following important price targets?
Downward Retracement
The mid-level of our horizontal range and the value area low are points of reference. The value area low tends to be more important because it appears to be better respected than the mid-level. If Bitcoin faces rejection at the resistance levels, we should recognize that the value area low acts as a reachable support segment. However, losing this level and closing some candles below it could signal Bitcoin aiming to break previous lows.
Future Price Targets
The region around $44,000 offers an important price target and level. If Bitcoin forms an impulsive movement towards the downside, the 0.5 Fibonacci retracement levels get triggered. There hasn’t been any significant reactions towards the downside as yet, and the next target is the golden Fibonacci ratio, literally coming up at the previous highs – liquidity level of $43,600.
The golden ratio, the liquidity level, is perfectly aligning with volume levels, the point of control, and the upper value area high. Therefore, although Bitcoin’s trend is towards the upside, entering a short position around this region could prove valuable.
Caution in the Bitcoin Market
While the opportunity to make earnings from Bitcoin remains high, it’s prudent to exercise caution in the coming days. Bearish indications are visible not just in the indicators but also in the recent impulsive push towards downside, characterized by a significant volume increase. Moreover, bearish divergences are also forming on the RSI and money flow indicators on the daily timeframe.
Conclusion
Regardless of these, if you remain bullish on Bitcoin and the trends point towards an upward trajectory, consider entering a long position only if a downward push occurs – at the bottom of our horizontal range. Also, bear in mind that this is just a price prediction analysis, it’s always good to do your own research before making any investment decisions.
