Bitcoin Forming a Bearish Continuation Signal

Bitcoin Forming a Bearish Continuation Signal

Price Top: Bitcoin rallied this week from 442 to 534. This is a bullish correction against a prevailing bearish trend, which accelerated after breaking below a key support around 550. So far, price is respecting the previous key support area, and consolidated during the 8/21 session under 534. As we got into the 5/22 session, price fell below 510, and broke below the consolidation pattern formed during the previous session.

Bearish Signal Pending: Price is now at the cusp of breaking a rising trendline from 8/18 (Monday). A break below 500 should clear the 200-hour and 50-hour SMAs and the rising trendline. The 1H RSI should also clearly break below 40 and perhaps tag 30. That would be a bearish signal in for the near-term and short-term, and a bearish continuation signal for the medium-term.

Bitcoin 1H chart 8/22
bitcoin 1h chart 8/22

(click to enlarge)

Bearish Outlook Maintained: In the 4H chart you can see that price cleared a local support/resistance pivot area before finding resistance, but the technical picture is still bearish. The 4H RSI held under 60, which is a sign that the bearish momentum is maintained. A break below 500 would bring price back below the 50-period SMA in the 4H chart, and would be another sign that the bearish trend is preserved.

Bitcoin 4H chart 8/22 
bitcoin 4h chart 8/22

(click to enlarge)

Medium-term Outlook: The downside risk is toward the 442 low, with further risk toward a 420 support pivot in between April and May. However, we should be aware of a local support/resistance pivot around 480. When price approaches this level and the 4H RSI approaches 40, expect some near-term support. However, the bearish trend should prevail as long as price starts to hold south of 500. Otherwise, the market might still be in consolidation, though the bearish outlook will remain unless there is a break above this week’s high at 534. Then, we might be looking at some medium-term consolidation, with short-term bullish outlook.

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