As the price of Bitcoin (BTC) couldn’t break through the resistance level of $12,000, a retracement did not come as a surprise. In recent days, BTC/USD pulled back to $11,400, a correction of almost 10%.
Crypto market daily performance snapshot. Source: Coin360
Meanwhile, gold, silver and other commodities are also correcting due to a slight bounce of the DXY, or the U.S. Dollar Currency Index.
What’s more, multiple heavy movers like Chainlink (LINK) and Tezos (XTZ) also showed substantial corrections in recent days. Can this be a moment to buy the dip, or are further revisions imminent? Let’s examine the charts.
Bitcoin rejected at $11,800 after breaking back in the range
The price of Bitcoin couldn’t force a breakout above the $12,000 resistance level, which led to a drop back into the range.
BTC/USDT 4-hour chart. Source: TradingView
As discussed in the previous article, the $12,000 area was crucial to hold for any further upward momentum. It failed to sustain this support, which means that a pullback became likely.
Immediately after the breakdown below $12,000, the price of Bitcoin fell towards the support area at $11,600. This $11,600 level resulted in a slight bounce towards $11,800. However, as the chart shows, the $11,800 area was then confirmed as a new level of resistance.
Such a support/resistance flip generally means more downside as the buyers aren’t strong enough to force the price above this resistance level. Given the weakness of such a move, more support levels below may get tested.
This is indeed what happened as BTC then dropped toward the next support level, which is the green zone, and the final crucial hurdle before a potentially quick drop to $10,000.
This key support level must hold
BTC/USDT 1-day chart. Source: TradingView
The bearish divergence is calling for a potential trend reversal. However, it’s not a confirmed bearish divergence, unless the market starts to make new lower lows on the daily timeframe.
As the recent low is found at $11,200-11,300, the market needs to stay above the green zone and recent low for a chance at more upside in the short term.
If the price of Bitcoin drops below the green zone, the next support zone is found at $9,600-10,000, and more pain for the bulls is on the horizon.
BTC/USD 1-day chart. Source: TradingView
There are several examples of invalidated bearish divergences found in recent years. One of them is shown in the chart (April 2019) and it’s looking similar to the current price action.
The potential bearish divergence was spotted on the charts here as well. However, it was never confirmed as its latest low held as support. Given that the structure remained intact (higher lows, higher highs), the market continued climbing higher as Bitcoin rallied to $13,000.
The overall conclusion is that the current price action reminds me of a lot of the price action the market saw in April 2019, and history could repeat as long as $11,200-11,400 holds.
The bullish scenario for Bitcoin
BTC/USDT bullish scenario chart. Source: TradingView
The bullish scenario depends on the $11,200-11,400 support level as mentioned previously.
As long as this area sustains support and Bitcoin reclaims the $11,800 area as support instead of resistance, more upside should be expected.
Further targets for Bitcoin would then be found at $13,000. However, the main resistance area after $12,000 is $15,500-17,000. In other words, if $12K finally gives, the market will become even more bullish than before.
The bearish scenario for Bitcoin
BTC/USDT 12-hour bearish scenario chart. Source: TradingView
Similarly, the $11,200-11,400 support level is also crucial for the bears. If this level is lost in the coming week, further downward momentum is likely, particularly toward the open CME Bitcoin futures gap at $9,7000, which is also a significant support level.
However, before this can happen, a potential retest of the $11,800-12,000 should not come as a surprise. In that regard, there are two crucial zones for the bulls and bears.
For the bulls, the $11,200-11,400 area must hold, after which the price of Bitcoin needs to break through $11,800-12,000.
For the bears, the $11,800-12,000 must sustain as resistance, and the $11,200-11,400 area needs to fail as a support level.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cryptox. Every investment and trading move involves risk. You should conduct your own research when making a decision.
