Bitcoin (BTC/USD) Technical Outlook Goes from Bad to Worse
BTC/USD Technical Outlook:
- Major level (39558) was broken on Friday
- Selling has next significant area of support in focus
- ETH/USD next support level at 1700
A couple of weeks back when BTC/USD was trying to hold confluent support via a horizontal shelf and trend-line I said, “as long as a close below 39558 doesn’t develop then the outlook is at worst neutral, but likely bullish.”
The reversal on Jan 10 offered would-be longs a decent risk/reward opportunity to buy at support, but as of Friday that idea was stopped out in favor of a major support break. Momentum since that break into today has been fierce.
The breakdown has the next big level of support in focus, and while it could certainly provide a floor for a big bounce, the macro outlook is breaking down as the broad uptrend comes into question. The deep retracement off the highs will soon have the June 2021 swing-low at 28600 in play.
In the context of a strong trend, testing and even worse, breaking, a prior swing low is a major red flag. A good uptrend consists of higher-highs and higher-lows. If the 28600 area holds, then BTC could rally strongly higher and be in the process of creating a broad range dating back to the early part of 2021.
But if support breaks, then BTC may be sufficiently damaged that it will be difficult to recover from. Yes a big bounce could still get underway, but that is all it will be viewed as – a bounce. The bottom line at that point, from a technical perspective, is that BTC/USD may go through an extended bear market lasting quite some time.
For now, will monitor momentum as support arrives from around 30066 down to 28600. A volatile reversal from that area could at least provide an opportunity for short-term traders looking to play an oversold bounce.
BTC/USD Daily Chart
ETH/USD I selling off even harder, having lost a third of its value in about a week. The selling looks set to continue until support via three lows created from May to July, all right around the 1700 mark. Like BTC/USD, watch for a volatile reversal to kick off an oversold bounce.
ETH/USD Daily Chart
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.