BTC/USD Larger Correction Taking Place
Bitcoin recently busted through its long-term descending trend line visible on the daily time frame to signal that a reversal from the downtrend is due. The price retreated upon reaching the $8,450 area and is in the middle of a correction.
Applying the Fibonacci retracement tool on the latest swing low and high shows that the 38.2% level lines up with an area of interest or former resistance at $7,675. The 50% level coincides with the broken trend line, which might also hold as support moving forward. A larger correction could last until the 61.8% Fib, but a move below this could signal that the selloff is resuming.
The 100 SMA is still below the 200 SMA to indicate that the path of least resistance is to the downside. In other words, the selloff is more likely to gain traction than to reverse. The gap between the moving averages is still widening to reflect strengthening selling pressure. Then again, bitcoin has climbed above the 100 SMA dynamic inflection point as an early indicator of bullish momentum.
RSI is turning lower from the overbought region, indicating that sellers are taking over while buyers take a break. Stochastic is also pointing down to show that bearish momentum might pick up and keep bitcoin in correction mode for much longer. Both oscillators have plenty of room to head south before reflecting oversold conditions, so the price could follow suit.
Bitcoin drew support from geopolitical tensions between the US and Iran, but profit-taking has been underway after the conflict seemed to de-escalate. Still, there is a lot of uncertainty surrounding the situation and worsening tensions could soon revive demand for cryptocurrencies.
Keep in mind that traders remain wary of putting funds in stocks and commodities when global conflict is present, likely seeking higher returns in alternative markets like altcoins instead.
Published at Fri, 10 Jan 2020 09:29:12 +0000
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