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Bitcoin: Potential Reversal Levels for All Tastes
Bitcoin failed to recover above important resistance level on the weekly chart.
Three long term support levels are located at $ 6250, $ 5200 and $ 4100.
Since March 13, Bitcoin has been steadily strengthening without significant pullbacks, but since April 13, the situation has changed a lot. The incipient decline may be the first stage of a long-term drawdown.
Popular crypto trader DonAlt (@CryptoDonAlt) shared a BTC chart on Twitter, in which he noted the most bearish currency close in the entire rally that began on March 13. He also identified three levels of long-term support that can suit traders with a wide variety of attitudes:
- Bull support: $ 6250
- Band Lover Support: $ 5200
- Bear Support: $ 4100
$ BTC update:
This is the most bearish close we’ve had in this entire rally.
If there was ever a signal for bears to come out again, this is as good as it gets, so it would make sense for things to calm down and pull back from here.
Supports outlined, let’s see where it goes. pic.twitter.com/aIOie3P7e2
– DonAlt (@CryptoDonAlt) April 13, 2020
Let’s try to take a closer look at each of these supports..
The chart clearly shows that last week the price bounced off the $ 6,800 level, which is key for the bulls if they want to keep the chances of continued growth..
The first support area is located at $ 6250. It was formed by the long-term course of the price in the period June-November 2018.
After the pair began to strengthen in March 2019, this area did not pass the test of strength as resistance. In addition, this area did not play a support role during the fall in March 2020. This reduces its significance, since the price has passed above and below it twice without testing..
However, due to its proximity to the current levels, a rebound from this support level can be regarded as an increasing minimum, which will cause the price to rise.
This support area represents the Fibo 0.5 level of the retracement of the entire previous bullish price move. Taking into account the two previous highs, a rebound from this area could lead to the appearance of a neckline on the chart, and subsequently the market could complete the formation of the right shoulder of the head-and-shoulders pattern (H&S). This is potentially fraught with further bearish breakout..
Thus, a rebound from $ 6250 seems to us unlikely. Even if it does, it most likely will not mark an actual bottom, but will lead to the formation of another high, followed by a decline..
According to the second scenario, the price will find support around $ 5400. This scenario can be called a “double bottom scenario” as a decline in bitcoin to this level will cause a double bottom to form, based on the closing levels on the weekly chart. We have already considered this possibility in our recent analysis..
This support area looks less significant compared to the previous one, as it appeared later, during the price increase that began in March 2019. However, the price treated it with respect during the decline in March 2020..
Thus, it is very possible that at this level the market will form a double / triple bottom, after which the price will start to rise.
A rebound from this level with a greater degree of probability – in comparison with the previous example considered – may be the beginning of a new phase of growth, and not just a short bounce.
In this scenario, Bitcoin will drop to $ 4,100, where the resistance area formed by the price during January-March 2019 is located..
This is the most bearish scenario, as it not only offers the lowest low, but also promises the most dire consequences for the pair. If BTC sags towards this support area, it could continue to decline and form a declining low. And even in the event of a rebound, the pair is likely to enter a very long accumulation phase.
Thus, the fall of bitcoin in the $ 4000 region may be an indication that the bottom has not yet formed.
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