Introduction
In a recent turn of events, Bitcoin witnessed a new lower low, resulting in the liquidation of approximately 20 million long positions. This article delves into the reasons behind a potential bounce from this specific level and outlines the upcoming Fibonacci price targets. Despite a setback, there are indications pointing towards a probable upward movement in the Bitcoin price.
Understanding the Bitcoin Market Structure
Analyzing the recent price action, we identified a five-wave structure towards the downside. The rejection from $49,000 marked the first impulsive Elliott wave, followed by corrections and subsequent waves. While some traders speculated an ascending triangle with a likelihood of an upward breakout, we argued that, considering the five-wave structure, the ascending triangle is a bearish pattern. This perspective aligns with a higher probability of a downside breakout.
Liquidity Dynamics
One noteworthy occurrence was Bitcoin’s inability to breach the previous low on the BuyBit chart. The failure to trigger stop losses below the previous low indicates that liquidity remains intact. Conversely, on Coinbase and Bitstamp charts, liquidity below the previous low was successfully taken, suggesting a potential reversal.
Anticipated Move and Targets
Observing the overall market sentiment, it appears that the five-wave structure towards the downside has concluded. Despite lower weekend volumes, a potential move to the upside is expected. It’s crucial to exercise caution due to potential manipulation and consider providing stop-losses with some breathing room.
The First Fibonacci Price Target
The 0.5 Fibonacci retracement level is identified as the initial price target. This level holds significance as it aligns closely with the value area high and the point of control, showcasing a concentration of volume. Traders should monitor the descending volume during the upward movement, and a three-wave price structure is anticipated.
Trade Strategy for Bitcoin Derivatives
As traders consider entering long or buy positions, it’s advised to set stop-loss orders slightly below the previous low. The primary target is the weekly higher timeframe resistance at the top of the horizontal range, approximately at $43,700. Additional caution is advised in trading over the weekend, acknowledging lower volumes.
Indicators and Bullish Signals
The RSI and MACD indicators display hidden bullish divergences, supporting the notion of a potential upward move. However, a break below the previous low could signal a shift in market structure, warranting increased caution.
Caution with Risk Management
Breaking the previous low would signify a bearish shift in market structure, prompting caution and a reevaluation of trading strategies. While considering long or buy positions, traders should be vigilant and adapt their strategies based on market developments.
Summary
In summary, Bitcoin’s recent price movement suggests the completion of a five-wave structure towards the downside, paving the way for a potential upward reversal. Traders should closely monitor key levels, exercise caution in volatile periods, and adapt their strategies to changing market dynamics.
