Bitcoin Resumes Downtrend after a Weekend Clear-out

Bitcoin Resumes Downtrend after a Weekend Clear-out
Bitcoin Resumes Downtrend after a Weekend Clear-out

Since breaking below a consolidation pattern support around 550, bitcoin has been bearish, with the 420-440 area in sight.

Bitcoin Daily Chart
bitcoin 8/18 daily chart

(click to enlarge)

Broken Triangle and Bearish Signs: The daily chart shows a broken descending triangle, with the decline supported by strong volume. Bitcoin is also trading below the 200-, 100-, and 50-day simple moving averages (SMAs). The RSI has dipped below 30, which shows strong bearish momentum, but also suggests we might see some correction soon at least within the intra-session time-frame.

Short-term Consolidation: 1H chart shows a consolidation pattern over the weekend after bitcoin found support around 482.
– Price rebounded, and eventually came up to 524, a support/resistance pivot.
– The rally also met up against a falling trendline that goes back to last Monday when the latest bearish trend started. Bitcoin also went up against the 100-hour SMA.
– The 1H RSI showed a loss of bearish momentum during the consolidation as the reading went above 60. However, we can see from price action that the market is still bearish.

Bitcoin 1H Chart 8/18
bitcoin 1h chart 8/18

(click to enlarge)

Clear-out: In the 1H chart you can see that price formed an inverted head and shoulders pattern over the weekend (8/16-8/17). This is usually a pattern observed after an uptrend, as a sign of price topping. However, during a downtrend, it is a bearish continuation signal. The head represents clear-out action. In this scenario, the head did indeed represent a bullish correction attempt that failed to stay above the resistance factors listed above. This is a bearish dynamic – the failure to break and clear above resistance.

Volume, Resistance: Volume on dips are still strong, and thus support the bearish scenario. At this point, we should look for resistance around 500, and downside risk to remain toward the 420-440 area. A break above 500 would suggest some further consolidation, but a break above 525 might be needed to introduce a bullish outlook, at least back towards the 540-555 area, which represents the triangle support area seen in the daily chart.

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