Bitcoin – Ready for a Bearish Attempt

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Bitcoin - Ready for a Bearish Attempt

Bitcoin found support at 442 during the 8/18 session. Then it started to rally against a prevailing bearish trend which accelerated after breaking down a triangle support (refer to daily chart all the way below).

Bitcoin 1H Chart 8/21

bitcoin 8/21 1h chart

(click to enlarge)

Bitcoin’s rally has so far stalled below 535, but it did come back above a previous consolidation which has resistance at 530. Price came up above the 200-hour SMA, and the RSI tagged 70. Just looking at the 1H chart, it is reasonable to have a bullish outlook. However, we will see that the 4H and daily charts are both bearish, and so the bullish outlook should be limited to the 1H chart for now.

The bearish outlook however will need at least a break below 510, which is a support/resistance this week. Above 510, bitcoin still has upside bias in the near-term, perhaps toward 540-550 area.

If there is a break below 510, the next bearish stage would be to break below 490, which would clear below the 200-, 100-, and 50-hour SMAs and a rising trendline. This dip could also drag the 1H RSI below 40, which will show loss of bullish momentum.

When we look at the 4H bitcoin chart, we can see that the bearish momentum is still maintained:

Bitcoin 4H Chart
bitcoin 4h chart 8/21

(click to enlarge)

The RSI is still hanging around 60. If it holds below 60, it reaffirms bearish momentum. Now, if the RSI pops up above 60, we might have to start considering a shift from a bearish trend to a neutral one, which means instead of the bearish outlook being toward the 340 low on the year, it would be limited to the 442 August low.

The daily chart should put things in better perspective. We can see that the current rally is a pullback after a descending triangle breakdown, which opened up the 340 low on the year.

I mentioned that if the 4H momentum no longer looks bearish, we have to consider a neutral mode. Well in this medium-term neutral mode, if bitcoin price comes up toward a central pivot area of the triangle, look for sellers in the short-term. It would really be a neutral-bearish mode. Only a break above 600 should introduce a bullish outlook for bitcoin in 2014.

Bitcoin Daily Chart
bitcoin daily chart 8/21

(click to enlarge)

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.