While still generally going sideways, the Bitcoin price has dipped to the bottom of its latest range at just under $83K. Should the $BTC price fall out of the bottom of this range, is this a time to be concerned and to start thinking that the top might be in and that a big correction could be in its initial stages?
A fall through the bottom of the channel or bounce?
Source: TradingView
The 4-hour chart illustrates how the $BTC price moved up and out of one channel and is now in a second range just above. The midpoint of the current channel clearly delineates between the price action above it and the price action below. As can be seen, the price fell through the midpoint and this has acted as resistance since.
It now remains to be seen whether the $BTC price will hold fast at the bottom of the channel and eventually bounce, or if the price will fall through and come back to test the top of the bigger channel below.
Indicators suggest that the $BTC price is fairly oversold in the short to medium time frames, so a bounce could be the more probable outcome. If the bears do win this particular battle, the top of the channel at $81,250 is the next strong support below.
RSI could signal a breakdown
Source: TradingView
The daily time frame gives us a clearer view of the price action currently. It does look like there could be a bounce from here, but being prepared for a breakdown at the same time is the best strategy.
Looking left, underneath the wick up to the $82,840 horizontal support level, there is a clump of price action that would also act as support if the price came down. This also lines up roughly with the top of the parallel channel.
At the bottom of the chart, the Stochastic RSI indicator line looks as though it is about to fall through the first trendline. With the rest of the day still to play out, it is not certain that this will happen. If it does, the next trend support is a fair bit lower. If the indicator line starts to descend to this level this would be a signal that the price action was breaking down, with the possibility of the $BTC price reentering the bigger parallel channel.
Macro view suggests that a bounce is more likely but keep an eye on bond yields
Source: TradingView
Are we making too much of this latest pullback? Looking at the price action from a macro perspective, all that has really happened is that the $BTC price has broken out of the parallel channel, and the price has simply come back to test the very important $82,840 horizontal support level. This makes perfect sense and is technical analysis 101.
Therefore a bounce from here is the far more likely outcome, even if there is a quick candle tail down to the top of the channel, to perhaps confirm the breakout.
While acknowledging that a sizable correction will have to occur at some point, the probable trajectory, maybe into the next two or three weeks, is to the upside. The RSI in this weekly time frame looks as though it can bear this thesis out.
On the other hand, if there is a bearish factor that can weigh down the chances of a $BTC rally igniting again, it’s bond yields. The U.S. 10-year bond yield is breaking out on Monday morning. The current level is at 5.223%, but look out for the yield hitting 5.3% as early as the end of this week.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
Source: Crypto Daily