Although hopes are high that the sell-off in Crypto markets is coming to an end, the second article of our newly born Dalu.digital will unfortunately bear a negative stance for the coming weeks. If you have not yet visited our Technical View section where we review the Secular Trend of Bitcoin, I urge you to read it as we outline why we believe that Bitcoin, and as a matter of fact all Crypto blue chips and altcoins, are currently in a secular Bear Market.
Last Friday break of 40,000 level has opened the door to further weakness and the next critical level and target lies between 28,000 and 30,000 which is the low that Bitcoin built between June and July 2021 after the “Sell in May & Go Away” cycle.
However, during the week-end Bitcoin found some support around 35,000 which is the classical congestion area that goes with round numbers. But we also suspect that it is helped by the fact that professional investors are out of the market enjoying their weekend.
The question is how quick the Bitcoin will drop to 30,000. Will we see what technicians call Trader’s remorse? After the break of a major support (or resistance) it is common for traders to ask themselves to what extent new prices represent the facts. And quite often they push prices back to the break level, hence 40,000 (or higher since the support is a rising trendline), before resuming the downtrend.
A great tool that we love to use at Dalu.digital is the Fibonacci Fan coupled with Fibonacci Retracement lines. As soon as we post a new low we immediately pull this indicator which helps us assess the retracements upside potential. If price fails to break the first fan we are quite certain that price will post a new low. This weekend Bitcoin broke through the 23% and 38% fan and as we write is breaking through the 50% line. However, after the break of the 2 first fan we should expect to see the price move beyond the 23% retracement level at 36000, unfortunately it missed two times that level. This suggests that the selling power is very strong.
I would give it one last chance as professionals come back to the market, however if on Monday it fails again to break 36,000 , we will see the downtrend resume and expect 35,000 to be challenged.
We have pulled the Fibonacci indicators on the chart above, the horizontal lines that bear the number 23% (36,000), 38% (37,600) and 50% (38,700) are the classic target levels that follow a retracement. This way you have at hand the congestion levels, or resistances if the price manages to move beyond 23%.