Dear traders, although the market is at the beginning of a positive trend, there are always possibilities of small drawbacks. Accordingly, we have a Bitcoin retracement possible so we prepared an analysis on a 1 hour BTC/USD BitMEX perpetual chart. Today we focus on visible divergences and eventual support levels.
Therefore, without any ado, let’s dive into analyzing the King of crypto! Where will it go from the current $9.300?
Divergences Reveal Possible Bitcoin Retracement
The hourly chart reveals some major issues for BTC’s growth. First and foremost, RSI and MACD readings since January 27th indicate divergences in comparison with the price movement.
Divergences like these usually announce a trend reversal. Even more so since Bitcoin failed to breach the $9400 local resistance level (the blue line). As we are analyzing an hourly chart, the reversal can be only temporary. These are undoubtedly some strong signals. However, if we want to lower the risk, we have to look for more.
Let’s zoom out to take a look at the 4-hour chart.
The MACD indicator on the 4-hour chart is going to cross over into the bearish area, and the RSI is about to exit the “overbought” zone. Combining the two chart intervals, Bitcoin has an even stronger retracement possibility.
Now, if this scenario comes to pass, how low can the price go, you ask yourself? In an effort to figure this out, let’s go back to the hourly chart and take a look at the Fibonacci retracement.
The Two Possible Levels of Retracement
There are two crucial support levels we need to be aware of at this time. The first is $8,900 (the upper blue line). Apart from being the historical resistance, this level coincided with the 0.382 Fibonacci retracement line. If bulls can’t support Bitcoin here, we are facing the drop towards 0.618 Fibonacci level at $8,700, which is also a historical support and resistance.
The latter is always regarded as a great entry point for investment. Moreover, it is a great target to close the short. However, there is a slight possibility that this level fails to hold the price above the water. In that case, both of the next Fibonacci retracement levels become important since they are the ones that Bitcoin may bounce off.
Don’t Underestimate the Power of FOMO
On January 28th, Bitcoin has, for the first time since early November, closed a daily candle above the 200 moving average (the red line on the chart below).
This is, by itself, a good sign of a positive sentiment kicking into the market. When positive thinking kicks in, FOMO can’t be far away. Especially in such a volatile environment. If traders start feeling it, they may not wait for the retracement to invest. Traders can’t predict these kinds of events. Therefore, the only thing we can do is to take steps to lower the risk.
A simple stop-loss is a good beginning.
Always trade responsibly and don’t invest more than you are prepared to lose.
You should look elsewhere for investment advice since this isn’t it. Even if it looks like it, it’s not. Cryptocurrencies are extremely volatile and risky speculations. Always do your own research. Consider consulting an investment professional prior to investing your money.