Potential Pullback Looms As Bitcoin Approaches Major Resistance Above $5,500
The arguments for a big market correction are gaining strength. As Bitcoin approaches another heavy resistance barrier buying pressure is likely to diminish as previous charts have shown. If and how far it will fall remains the big question this week.
Bitcoin Approaching 50 Week MA
When Bitcoin broke through the 200 day moving average there was a lot of optimism for a move up towards $6,000. However another big barrier stands in its way in the form of the 50 week moving average which is aligned with further horizontal resistance.
According to trader and analyst Josh Rager this could create a pivotal point for Bitcoin which has previously been held down by this technical indicator;
Historically then Bitcoin’s highest price in the short term may only be $5,634 where it meets the 50 week moving average. During the bear market of 2015 this level proved to be a reversal point of the rally which led to a final capitulation before any major recovery began. The dump then saw BTC fall to around $200 which was 82% down from its previous all-time high. Sound familiar?
The 200 week moving average, not to be confused with the 200 day MA which Bitcoin broke through last week, has been a solid support zone then and today.
Pullback or More Consolidation to Come?
Charts are wonderful things as they can tell whatever story you want to hear. As a counter to the potential pullback theory is continued consolidation. Bitcoin consolidate for 150 days around $6,000 before breaking down. When it did it dumped 50%.
BTC also consolidated for 130 days at around $4,000 before breaking out which has driven a 25% gain.
The call for Bitcoin back at $6,000 is also a strong one however at the moment it appears that the bearish outlook is the most dominant. Trading is largely psychological and many make the same mistakes time and time again. As Twitter’s ‘CryptoFib’ put it;
“The thing about trading that cracks me up is this. Everybody wants to buy when it is going up into resistance. But, they never buy when it is going down into support. Amazing how that happens and why 90% of traders fail. It is all in the mind folks.”
These behavioral patterns are precisely what determine the levels of support and resistance in the first place and drive market momentum in both directions.
At the time of writing Bitcoin was still holding up above $5,200, but only just after hitting $5,300 twice and pulling back twice. From the start of last Tuesday’s big pump when Bitcoin reached $4,700 it is up over 11%. What is guaranteed is that when it does correct it will drop hard and fast before finding a new support level which is likely to be in the low $4,000s.
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