Chart Of The Day: Is Bitcoin’s Recent Rally Over?
Investing.com | Feb 10, 2020 21:52
Bitcoin has plunged around 3.75% today, taking the cryptocurrency back below the critical $10,000 level. This selloff comes after a straight five-day rally of over 10%.
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Despite the numerous reports currently circulating about a potential digital currency launch by the Fed and the ongoing interest in Facebook's (NASDAQ:FB) much-debated digital money initiative, Libra, the story dominating the headlines today is the growing impact of the continued spread of the deadly coronavirus.
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Of course, the Fed may or may not consider creating a U.S. digital currency. And Mastercard (NYSE:MA), a founding member of the Libra Association, which had been toying with the idea of using Facebook's crypto initiative as its digital currency, has decided against it due to transparency concerns.
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But these reports have been going back and forth for a while, yet hadn't impeded the 10% rise of the past five days. So the driver of today's slump is either still unknown or simply profit-taking at a time when other haven assets are fluctuating.
When so much is unclear around the fundamental drivers of an asset, technical analysis of the charts can add a bit more clarity.
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The December-January H&S bottom’s target was more than realized during the rally. The digital currency reached a round number whose psychological significance has left an impression, in the form of an obvious support-resistance level, starting with the July 2 low. Later, after falling through it in September, the price turned to a resistance in October and November.
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Both the MACD and the RSI demonstrate a setup for at least a corrective pullback. The MACD has attempted a third rise, which, if it fails and falls below the late-January high, would be an obvious sell signal. The RSI has already provided such a call, when dipping below its recent uptrend line since mid-December, from a 75 level, the most oversold since June, to boot. A fall below 54 would constitute a momentum top.
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The minimum expectation is a return to retest the uptrend line since the beginning of the year. Note that as of this position, such a meeting would coincide with the price level that was a support through the end of December and beginning of January, after already acting as a resistance in mid-December. There is a lot of vested interest at the $9000 levels.
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Conservative traders would wait for a return to the uptrend line and seek evidence for demand.
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Moderate traders may wait for a pullback to buy at a better price, not waiting for a rebound that would evidence support.
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Aggressive traders may short the expected pullback.
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Trade Sample - Short Position
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