Bitcoin hits key levels of $8150 | If we get past 8150, we can hit $9225 | Structure still bearish!
Bitcoin broke past key resistance levels overnight, a post-COVID breakout!
Happy Wednesday, the price of Bitcoin exploded overnight, above our target of 8150. We’re still in the consolidation block from previously, which a couple days ago I informed the community that price would have a high chance of reaching. The question is now that we pierced this area, what will the reaction be? Sometimes reactions to key support-resistance (SR) levels can be aggressive, because if the price goes up too fast, it’ll get rejected and get sent back down just as hard as it came up. So let’s carefully weigh that possibility.
A retrace wouldn’t necessarily mean it’ll completely crash, but price could pull beneath pre-breakout levels. For example, we could draw an ascending triangle from the local bottom (April 25) after the short-squeeze wick from April 23, and consider that whole structure as a bull flag breakout. This close to the pre-COVID price level may get a retrace to the top of the triangle before finding support and breaking out once more. A measured move on that breakout would get us to about 8850.
Last night I told our members that I did expect a higher probability of a breakout, but unfortunately, this happened while I was asleep in my time zone. My trigger would have been right on the closing of the candle above the triangle.
Now that we are here, instead of chasing the move, here’s some things I’m considering: I’ll wait for a retrace and retest of support, as per the chart. If resistance flips into support and holds, if the bots and professionals decide to keep price stable up there, we may have a chance to re-buy around that level of 7800.
One technical indicator we must consider is the yearly VWAP, which was floating at about 8050 this morning. Price piercing through the VWAP without much effort is a bullish sign.
Remember that from January 24, 2020, the WVAP formed a base in price at 8223, and we broke past that this morning. All these things are telling us that we’re coming into headwinds of strong resistance, while the market is clearly bullish. But I want you guys to keep in mind that a lot of this momentum is feeding off the hype Fed stimulus (and the halving, to a lesser extent). With all this “free” money coming into the market, we will see unnatural price action. But heed my warning: at some point, the rug is going to get pulled.
The Fed cannot support the market forever. With the way the economy looks right now, it’s just a matter of time before the market begins to reflect the intrinsic value of assets, and those prices will be much lower than they are printing today. I believe Bitcoin will have another leg down, along with the stock market. Historically, whenever you have 60 to 70% drops in the stock market, it is often followed by an initial strong recovery, which creates a higher probability for a pullback towards the lows. That may look like a W-shaped recovery, where another drawdown may take many investors by surprise.
Past performance is no guarantee of future results, but we can use this information to make calculated decisions moving forward.
Moving forward, we can use the tools at Tradinglite to do a forensic analysis of order blocks. There’s a good amount of sell orders built up to 8300, while the largest wall is grouped between 8300–8400. Beyond that, there is not much resistance. As of this writing, 8150 sits at the monthly and weekly pivot, which would indicate a strong resistance area.
We are in the seventh consecutive bullish week for Bitcoin and other markets, and there isn’t much historical precedent for that in Bitcoin that would lead me to believe that it’s a bearish signal. However, on the daily time frame we are reaching important Fibonacci retracement levels (Fib) in the S&P 500 Emini Futures market. The 61.8% Fib on the S&P 500 is around 2930. We missed that mark in yesterday’s candle by under 13 points.
Historically, bear market rallies have ended between the 50% and 61.8% Fib. Price touches that region, then rolls over. Keep that in mind — while things are looking bullish right now, we’re going through an interesting transition in the world.
The Bitcoin halving event is nothing compared to global markets artificially pushing up. Beyond the S&P 500, we can see a similar trend in the Japanese markets, which have also thrust upward significantly. The Shanghai Composite looks similar. The whole economy is rebounding on stimulants.
The next big level for Bitcoin to reach, if the price gets past that 8150, is 9200. Looking at the multi-day consolidation before the COVID drop, as well as a similar pattern of consolidation that happened last September, we can map out 9200 as a strong SR level. If price rolls back from there, the stair-stepping pattern that was printed on the way up may lead to a collapse in the same way the similar pattern between January and March 2020 did.
My dollar USD-JPY trade was triggered around 106.91 as prices broken down, and that short continues to do well as of this writing.
Looking at the USO ETF, premarket price action has behaved erratically. We have discussed in length in the Advantage community that this asset may be valued at zero or even be delisted soon, and we’ll keep everyone updated.
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This article was adapted from the video below, recorded at 6:30 AM, April 29 while the price of Bitcoin was at 8162 (target from April 27 hit!)