Hey everyone, I hope you are doing well this May long weekend. These past two months have been insane for both the traditional markets and the cryptocurrency markets. We have seen a 35% recovery in the S&P 500 and a 160% recovery in Bitcoin. This recovery has dramatically polarized the bulls and the bears, leading to many differing opinions about what will happen next.
Today, I wanted to do a top-down analysis of Bitcoin Starting from the weekly time frame then going down to the 4-hour chart. The weekly and daily time frame we will show us price ranges that act as support and resistance. Then, we will go down to the 4-hour charts to see how price reacts with these key support and resistance levels.
1-Week Time Frame BTCUSD Coinbase
On the 1-week time frame, we can see a key area of support and resistance around $9,500 USD. Back in April 2018, we hit the price level of $9,500. We can see that there is a wick above this candle to $10,000. This means that within the week we reached prices above $9,500 but failed to close the weekly candle at a price above $9,500.
We did not retest this price level until June 2019. When we tested $9,500, we broke straight through and reached a high of $14,000 USD. In the next couple of months, Bitcoin formed a descending triangle with support at $9,500. As we can see, Bitcoin tested this level 3 times and on the third test of this support, we broke below.
After we broke this descending triangle, we quickly formed a low and bounced, retesting this $9,500 level. Bitcoin once again moved above the $9,500 level. To a high of $10,400 but failed to close the week above $9,500. After this rejection, we formed a lower low of around $7,000 USD. From there, Bitcoin rallied to once again retest $9,500. Bitcoin passes through the resistance at $9,500 and formed a high at $10,400.
The news of the Corona virus sparked fear in both the traditional and the cryptocurrency markets. Bitcoin soon fell below $9,500 and hit a low of $3,800. We should note that $10,400 also is a key level of resistance. We have tested this level twice and have been rejected both times. This rejection from this level has caused us to form lower lows.
Fast forward two months and we have recovered by 160%. We are retesting this $9,500 level once again. To figure out what will happen at this level. We should go down a time frame and visit the daily chart.
1-Day Time Frame BTCUSD Coinbase
Going down to the 1-Day chart we can see a little more information. Back in June 2019, the $9,500 price level acted as resistance before we broke through. Bitcoin then bounced off $9,500 4 times inside of the descending triangle before breaking below.
We can see that Bitcoin found support around $8,000, then dead cat bounced off of $7,500. We shot up to a high of $10,400 USD but failed to close its daily candle above $9,500. Over the next few days, bitcoin remained around $9,000. It tested $9,500 once more, got rejected, and formed lower lows.
Once again from the lows, Bitcoin rallied and faced resistance at the $9,500 level. This time Bitcoin broke through topping out at $10,400. We then tested support at $9,500, bounced off, and formed a lower high. The support broke and Bitcoin once again formed lower lows, wicking down to a low of $3,800.
Fast forward to the month of May. Bitcoin once again is approaching this $9,500 level. We started the month by wicking to $9,500 but then closing the day under $9,000. Over the next week, we continued our upward momentum and shot past $9,500. We closed the day above $9,500 at a price of $10,000.
Bitcoin did not sustain this, though. Quickly we revisited the $8,000 levels. We wicked down to a low of $8,100, closing the daily at $8,500. This $8,500 is the same line of support we faced back in March before the big drop.
From there we closed another daily candle above $9,500. The following day though, we formed a bearish engulfing candle closing back below $9,500. To get a more detailed look lets go down to the 4-hour chart.
4-Hour Time Frame BTCUSD Coinbase
Zooming into the 4-hour chart we see things a little clearer. First off, we notice the wick on May 1st that touches the resistance of $9,500. We then moved sideways, followed by a rally to just before the $9,500. Around $9,300 Bitcoin shot through the area of resistance, closing the day at $10,000. A quick thing to note is $10,000 is a major psychological barrier. This is because $10,000 is a big even number. So many people would take profits around this level.
Bitcoin failed to rally past $10,000 and retested $9,500 soon after. We bounced off this level, formed a lower high, then had a sudden drop to the $8,000 level. We see that on the 4-hour chart. Bitcoin really struggled to close a 4-hour candle below $8,500.
After this, Bitcoin rallied back above $9,500. I found this strange because it seemed Bitcoin didn’t recognize this price level as an area of resistance; we just moved right through it. We formed a lower high and If we connect these highs. We see that Bitcoin is forming a descending resistance line. The next price level I will look for Bitcoin to react to is $9,700.
Considering the recent analysis, I have done I can conclude that if we close the weekly candle above $9,500. This will play as evidence that the bullish trend on Bitcoin will continue. The chance of us breaking $10,400 is likely. We could even see highs as high as $12,000, finally closing the CME gap from $11,600-$12,000 that we have.
If we cannot close the weekly chart above $9,500. This paints a different story for Bitcoin. This could mark the end of a trend in the short term. Entailing, we could retest the $7,000 levels in the weeks to come.
Or, a more bearish outcome could incur. Based on the trend of how the daily candle reacts to the $10,400 levels. If we cannot rally above this level. We could continue the trend of getting rejected and forming a lower low on the weekly. The close of the lowest weekly candle is around $5,000, opening up the possibility that we could test $3,800. This seems highly unlikely given the halving just happened and the supply of Bitcoin mined was cut in half. But we can’t ignore the possibility of this occurring.
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