Bitcoin magnetised to the 500-day moving average
Bitcoin remains in a seven-month bear trend, confirmed after we broke the 11-month trendline at the beginning of June. You can see this in the weekly chart below.
Although the weekly chart outlook remains negative, the daily chart below shows why the price has been more stable in recent weeks. The green 500-day moving average appears to have halted the move to the downside.
When we broke the previous crash low set in February at 5920, I assumed this would be the start of the next leg lower in the bear trend. This proved to be incorrect as prices bottomed 140 pips lower at 5780 at the end of June.
The bounce, however, did not cover much ground as we topped a fraction below the purple 55-day moving average at 6800. This area had a second important resistance at the short-term 23.6% Fibonacci level of 6763, as you can see in the four-hour chart below.
Bulls gave it their best, managing to hold prices just under the Fibonacci level for well over a week. In the end, though, they lacked the conviction to get the price through the resistance and of course the bears seized control again.
Note how the price is now holding below all the moving averages in the four-hour chart. This adds pressure in the short term.
The shorter-term one-hour chart also has quite a negative outlook. Note how, once prices broke the red one-week trendline, which coincided with the (red) 200-hour moving average and 23.6% Fibonacci support at 6600/6570, the market collapsed rapidly, breaking the (green) 500-hour moving average and 38.2% Fibonacci support at 6420/10 to bottom exactly at the 50% Fibonacci level of 6295.
We are now stuck between the green 500-hour moving average and support at the 50% Fibonacci.
A glance back at the daily chart above sees prices being supported by the green 500-day moving average at 6250/30. I see this as the only hope for bulls. It looks unlikely, but if they can engineer a bounce from here they can re-test the purple 55-day moving average at 6800/15.
Clearly bulls then need a sustained break above here to start a more meaningful recovery towards the short-term 38.2% Fibonacci resistance at 7370/75, although this is quite minor. The bigger challenge is where the blue 500-day moving average meets the six-month bear trendline, just above 7600. Here it would be worth trying short positions to see if the bear trend remains dominant.
Of course if prices begin holding below 6200, the 500-day moving average has failed the bulls and we are likely to re-target the 5920-5780 support area. A break below here in the bear trend risks a slide to 5555, 5370/60, 5100 and perhaps as far as the blue 100-week moving average at 4750/4700.
Technical Analyst & Trader
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