Chart Of The Day: Why Bitcoin Is Heading Even Lower

Chart Of The Day: Why Bitcoin Is Heading Even Lower

Investing.com  | Oct 07, 2019 20:09

Bitcoin is down by almost 25% since its Sept. 3 close. That was the top of the last rally since the price began moving with a downward bias after the June 26, $13,764 high. And the likelihood is that it's heading even lower.

As a decentralized asset, there's always been speculation and disagreement on what moves the price. The current fundamental driver may be fractional reserves practices, potentially increasing what was always considered a maximum of 21 million coins. The outlook for a higher supply reduces current demand: 18 million have already been mined.

Meanwhile, it's failed to recover from its 20% percent drop in two days. Nor is it likely to. The chart below helps illustrate why.

Bitcoin price chart

That 20% plunge was a downside breakout of a triangle top. The consolidation that followed — that failed to create upward momentum and attracted no dip buying — is deemed bearish. At the same time, the upward bias suggests profit taking, allowing new blood to take the place of previous investors for the next move, presumably one that's downward.

This pattern formed a rising flag, bearish after a sharp move, whose setup for another leg in a downtrend is strengthened by its upward tilt, as described. The fact that the bearish flag formed as part of the very breakout that completed the previous bearish pattern emboldens the pessimistic picture.

In addition, the 200 DMA realigns with the flag top, reinforcing it as a resistance. And finally, Sunday’s downward breakout signals that the new investors have the same intentions as the previous ones – to sell and move on, creating another slide down.

Trading Strategies

Conservative traders would wait for a significant downward move, followed by an attempt to return above the flag, whose failure would confirm the downward trend.

Moderate traders may be content with a close below the Sept. 30, $7,753 low, followed by a pullback to at least provide a better entry, if not to increase the odds of a continued downtrend.

Aggressive traders may short now.

Trade Sample – Short Position

  • Entry: $8,100
  • Stop-Loss: $8,600 – 200 DMA
  • Risk: $500
  • Target: $6,600
  • Reward: $1,500
  • Risk:Reward Ratio 1:3
  • Investing.com

    Related Articles

    Latest comments

    Add a Comment
    Please wait a minute before you try to comment again.
    Discussion
    Write a reply...
    Please wait a minute before you try to comment again.

    Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
    Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
    Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
    It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
    Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

    English (USA) English (UK) English (India) English (Canada) English (Australia) English (South Africa) English (Nigeria) Deutsch Español (España) Español (México) Français Italiano Nederlands Português (Portugal) Polski Português (Brasil) Русский Türkçe ‏العربية‏ Ελληνικά Svenska Suomi עברית 日本語 한국어 中文 香港 Bahasa Indonesia Bahasa Melayu ไทย Tiếng Việt हिंदी
    Sign out
    Are you sure you want to sign out?
    NoYes
    CancelYes
    Saving Changes

    +