Another wave down?

A week has passed since our last update and the 3 of the most capitalized Cryptos have retraced 50% of their drop since the Black Friday of January 21. For the purpose of this week’s analysis, we will use the same Hourly chart of BTCUSD we posted last Monday.

After breaking 23% Fibonacci level at 36,000 Bitcoin began a classic ABC retracement which topped at 50%, around 38,700. This level was tested a second time yesterday, posting a double top which eventually is a first sign that the retracement is losing its strength. And as we are writing this update the price went through the trendline that has been supporting the rise since last Monday.

As highlighted in our chart, there is a triangle pattern coming from the trendline that joins the 2 tops at 38,700, acting as a resistance, and the supporting trendline of the retracement. This particular shape usually indicates that the demand is weakening, in fact we often see a false break of the resisting trendline followed by a sudden reversal and a sharp drop to the level where the triangle started. In this case 35,600.

As we pointed earlier, unfortunately BTCUSD just broke the supporting trendline without even going through the hassle of breaking the resistance at 38,700 and then reversing its trend as we described above. This shows how the market is heavy and investors are looking for every opportunity to sell short or unload long positions.

With this in mind, Bitcoin will most probably start the week with a test of the congestion area at 35,600/36,000. If this support does not hold, Bitcoin will head straight for the low posted on January 23. Followed then by a first test of the next major support area at 28,000/30,000, which is also the target set after breaking 40,000 level (see our Technical Section for BTC secular trend analysis). This will obviously drag down the Crypto market as a whole.

We pulled the same Fibonacci retracement indicators on a Daily chart, between November top and the low of Jan.23, and we found out that this week the 23% Fibonacci Fan line will be around 38,700, last week’s double top. If you short Bitcoin this week that will be the level to place your stop.

Crypto Financial Services will post another update this week if our downside scenario does not occur.

Sail Safe.

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