After days and days of consolidation, bitcoin reached a new high for the first time in almost two weeks. However, this new high has been short lived so far, as it was sold by eager bears almost immediately:
Figure 1: BTC-USD, 4-hour candles, New High
Our current 4-hour candle provides for a relatively light retracement after days and days of uphill grinding. We were able to hit a new high, but it was quickly rejected and, depending on the day's close, could lead to a macro-reversal setup called the Swing Failure Pattern (SFP):
Figure 2: BTC-USD, Day candles, potential SFP
An SFP is simply called a push to a new high not higher than the previous high. This is a tactic often used by large institutions to generate liquidity before a market reversal. In our case, since these are daily candles, this could mean we are testing new lows in the middle of $ 3,500. If it comes to a reversal, the first logical stage to be tested is the $ 3,700 range. If we manage to close a candle below this and our previous low, it could be an uncomfortable run to the low $ 3,000:
Figure 3: BTC-USD, Day candles, support zone
The red area described above has been our last support in recent weeks. It has also proven to be a drag in the past and is an important pivot in our current market structure. If we fall short of this value, this would be a third failed attempt to gain support and could lead to a strong, powerful downward move. We never re-tested our $ 3,000 macro low, so we could take a big step toward supporting macro support. Three failed attempts to break our assortment (all three with very strong rejections) show that our market is still heavily dominated by supply within our current range.
At the moment the resistance test is not finished, so it is a bit early to make a macro market call. However, the presence of supply is clear. If we look at Figure 3, we see big daily candles refusing our $ 4,000 tests. So far we have not given a very strong macro support test. It therefore seems logical that after three failed attempts, the probable approach for the macro market would be a test of $ 3,000.
As I said, the move is still fresh, so we have to take it day by day. Look for the red-rimmed level, as a close below would likely confirm a strong downward move. We have many trapped bulls at our current level and a strong downward move could possibly push them out of positions.
- Bitcoin finally broke a new high, but was immediately rejected. This rejection sets us up for a reversal called the swing failure pattern. The failure to close above the new high could mean that a liquidity run took place in which large institutions shrink the market.
- On a macroeconomic level, the market has not been able to break out of our multi-month range three times – which suggests supply dominance in the market.
- If there is a strong continuation, we could easily see a $ 3,000 test before a significant uptrend in the market is achieved.
Trading and investing in digital assets such as Bitcoin is highly speculative and carries many risks. This analysis is for informational purposes and should not be considered as investment advice. Statements and financial information on the websites associated with Bitcoin Magazine and BTC Inc. may not necessarily reflect the views of BTC Inc. and should not be construed as a confirmation or recommendation to buy, sell or hold. Past performance is not necessarily an indication of future results.
This article originally appeared in Bitcoin Magazine.
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Contribution Source: Bitcoin Price Analysis: New Setup for High Reverse Potentials
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