Bitcoin has taken a considerable hit over the weekend as news of fresh restrictions out of China has weighed on the digital currency’s prospects, and in turn, its value. As traders however, the direction is irrelevant; it is the volatility we look to take advantage of. So, how can you profit from the leading digital currency on Monday? Here’s what you need to know.
First, let’s take a second to do a quick recap. The BTCUSD trended steadily downwards throughout what initially looked as if it was going to be the entire week. On Friday however, a spark of volatility initially strengthened the pair before a sharp reversal catalyzed a steep decline. From support at 435.14, the pair ranged throughout weekend, but a second sharp decline at the Monday market open broke through range support and further weakened the BTCUSD. Support at 413.03 catalysed a small correction, and the pair now trades around the 425.00 flat mark.
So what should we expect as the day matures? There are two likely scenarios. The first, one that mirrors the weekend action. After Friday’s sharp decline the pair traded within a relatively tight $20 range. With in term support at 413.03 and in term resistance 435.13, a trader could enter short at resistance and long at support with stops above and below the respective levels. This type of intraday range trading could prove effective if the conditions continue.
Alternatively, look for a break below in term support to validate a continuation of the downtrend, with an initial downside target of previous support at 382.35. A break, and a close, below that level, would offer up the chance of a potential run down to 342.67.
The recent action has demonstrated just how volatile the cryptocurrency pairs can be, so it is important to stay on top of your risk management to ensure you don’t get caught on the wrong end of a reversal.
To contact the reporter of this story: Samuel Rae at Samuel@forexminute.com