Bitcoin Awaits Breakout from Short-term Range Consolidation

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Bitcoin Awaits Breakout from Short-term Range Consolidation

Consolidation Range: After breaking below a key support area around 555, Bitcoin price fell sharply, but has found support around 500.00 during the 8/14 session. We saw a rally come off a bullish divergence, but there is resistance at the 525 area, which was a previous support pivot on 8/13.

Bearish Breakout Pending: As we get started with the 8/15 US session, bitcoin looks poised to continue its downs trend. A break below 497 can clear the path towards the 420-440 area, which is a common price area during late-April, early-May. (refer to the daily chart below)

More Consolidation: If there is a break above 525, it would clear above the consolidation range, above a week long falling trendline, and the 50-hour simple moving average.

bitcoin 8/15 1h chart

Here are a couple of bearish signs from the 1H chart:
1) The moving averages (200-, 100-, and 50-hour) all slope down, are spreading apart in bearish alignment, and has price trading below them.
2) The RSI has tagged below 30, and even 20, but has held below 60, even 50. This shows persistent and strong bearish momentum developing.

Bitcoin Daily Chart 8/14
bitcoin daily chart 8/15

(click to enlarge)

Downside: The daily chart shows that after a break below 555, the market has opened up the 420, and maybe even the 2014-low in the 338-340 area. Note the strong momentum accompanying this week’s downswing.

Oversold: The RSI dipped below 30, and thus reflects oversold conditions. But that does not mean there has to be a retracement especially when a market starts trending as bitcoin looks to be doing now.

Consolidation scenario, resistance: If bitcoin price pops up above 525, then we might have a consolidation that will pull the RSI back above the oversold area, at which point it will be vulnerable to sellers, especially if price approaches the 550-560 area, the previously broken triangle support area.

To contact the reporter of this story, email Fan Yang at fan@forexminute.com
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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.