Analysis provided by Ashton Fraser, learn more about his Forex Reversals trading strategies.
Bitcoin dropped like a tank this morning, will the trend continue?
Lets take a look at the hourly chart for BTC/USD attached below (click to expand).
As we can see, majority of the candlesticks were bearish, thus showing this was a strong trend. It's quite rare to get such a high percentage of candles being of one direction like this, with so many of them possessing little to no wicks, indicating further strength in the bearish trend.
I've done the Fibonacci study from the clear swing high at 590, to today's low at 430. Immediately we see how price reacted and is still reacting to certain important Fib retracement levels. Before price retraced however, look at the candle I've circled in blue. Some important points of note regarding this candle. Firstly, it closed outside the lower Bollinger line. In fact, it almost opened below that line as well. But then, look at how long the lower wick is. It's enormous, taking up more than half the entire length of the candlestick itself. When such a long lower wick occurs, it's important to be aware of other technicals to see if price is going to bounce upwards. Also, on the same candle, we realise how the Stochastics (10,6,6) are oversold, and have now crossed upwards. And with the Accelerator Oscillator turning green, thus price rose quite significantly over the past five hours.
Look where it stopped however. At the 61.8% Fib retracement level at 528, which also happens to be where the middle Bollinger line is, before coming down to the 38.2% Fib level, where it's currently residing. Not for too long however.
Right now, some of the technicals are still telling us there is still some more room for a bullish retracement, yet the overall trend is still bearish. I'm expecting price will hover between 530 and 460 for the rest of the day.
