Bearish Pennant Portends Weekend Losses
The bitcoin price on Friday expects to close the week on another drop as it slows its upside correction following yesterday’s $400 plunge.
The BTC/USD rate is now trading at 4283-fiat, up 4.8-percent from its intraday low. The upside action is taking place as volume drops. It means that traders are showing no support to the move up, and the BTC/USD rate should fall. From a technical point of view, the pair is forming what traders call a bearish pennant. It means that traders are shorting their positions after the latest drop, leading BTC/USD to make lower highs and higher lows. Overall, the consolidation should meet a downside action.
Meanwhile, the US dollar expects to lose some of its yearly gains as Brexit comes closer to a fair deal. The draft declaration agreed upon by both the United Kingdom and the European Union has created a positive atmosphere for traders, meaning that the greenback could correct lower by as much as 10 percent. The global impact of a weak dollar will be seen across its quoted assets, one of them being bitcoin, which is attempting to locate a bottom after two weeks of constant bearish action.
As of now, the shorts in BTC/USD are targeting the lower trendline of the triangular pennant which, if broken, could lead a drop towards 4000-fiat. A bounce back from that trendline, meanwhile, will open a good long opportunity towards resistance. If volume begins to drop near it, be prepared for a dump.
Technically, on the daily chart, the RSI has extended its stay inside the oversold area and the Stochastic Oscillator is hinting at a similar action. The BTC/USD index, meanwhile, is trending inside a giant falling wedge, as discussed in CCN’s previous analysis. A medium-term bullish correction could create long opportunities towards the intermediary target near 4500-fiat, leading to a full-blown recovery towards the wedge resistance, ensuring a breakout scenario towards the 200-period moving average.
The range we are watching today is defined by 4254-fiat as interim support and 4298-fiat as interim resistance. We are already in a position to apply our breakout strategy. Therefore, we are starting by opening a short position towards 4171-fiat while maintaining our stop-loss level just 3-pips above the entry point.
In the event of a bounce back, we would enter a quick long position towards 4298-fiat to reserve minimum profits. As we do, a stop loss around 4250-fiat would minimize our losses should the bias reverse.
An extended upside, at the same time, will have us put another long position, but this time towards 4341-fiat. A stop loss just 3-pips below the entry point will define our risk management perspective.
Featured Image from Shutterstock. Charts from TradingView.