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It’s been a rough week for cryptocurrencies with downbeat headlines alongside a rebound in the U.S. Dollar fueling a perfect storm for the recent collapse. You may have noticed my focus has been more on Ethereum as of late, but recent price action in Bitcoin has finally offered some clarity. Here’s what the charts are saying.

BTC/USD Daily Chart (Log-Scale)

Bitcoin Price Chart- Daily Timeframe

Technical Outlook: Bitcoin prices failed to hold above the upper median-line parallel (and was followed by and outside-day reversal off the highs) with a subsequent break below the monthly opening-range yesterday keeping the focus lower in the crypto currency. Interim daily support rests with the 50% retracement at 3404 with a more significant support confluence eyed at 3023/97- this region is defined by a host of Fibonacci considerations and converges on the lower parallels heading into next week. Resistance now stands with the median-line with a close back above 4002 needed to invalidate the current bearish outlook.

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BTC/USD 240min Chart

BTCUSD Price Chart- 240min Timeframe

Notes: A closer look at price action highlights Bitcoin trading within the confines of a near-term descending median-line formation with prices slipping below support at 3776 today in early European trade. From a trading standpoint, the focus remains lower while below 4000 with a breach above the September trendline resistance (red) needed to shift the focus towards the upper parallel (currently ~4370s).

That said, a break lower from here targets the lower parallel / 161.8% extension at 3155 backed by the key 61.8% retracement of the July advance at 3033 and the head and shoulders measured objective at 3023- both levels of interest for near-term exhaustion / long-entries. Bottom line: look to sell rallies for now with the decline to ultimately offer more favorable long-entries near the key structural support confluence noted earlier.

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Bitcoin IG Client Sentiment
  • A summary of IG Client Sentimentshows traders are net-long BTCUSD- the ratio stands at +1.65 (62.2% of traders are long) – bearish reading
  • The percentage of traders net-long is now its lowest since Sep 1st when it traded near 4864.43
  • Long positions are 5.7% lower than yesterday and 12.9% lower from last week
  • Short positions are 16.8% higher than yesterday and 37.2% higher
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Bitcoin (USD) prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current Bitcoin price trend may soon reverse higher despite the fact traders remain net-long.

See how shifts in retail positioning are impacting trend- Click here to learn more about sentiment!

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Relevant Data Releases

Bitcoin Prices Continue to Bleed- Levels to Know as Crypto Collapses

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Other Setups in Play

- Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex or contact him at mboutros@dailyfx.com.