The bitcoin price on Wednesday showed signs of recovery after two weeks of massive selling action.
The BTC/USD rate surged as much as 7 percent to establish an intraday high at 4645-fiat. The pair consolidated above 4500-fiat for a brief time but lost steam ahead of the US trading session, creating lower highs towards 4241-fiat. The likelihood of a further bull correction looks meager owing to trading activity at BitMEX. The derivatives platform currently dominates bitcoin trading volume and has processed circa $ 5.3 billion worth of trades. The action shows that traders are willing to short their bitcoins in the futures markets, which could make the digital currency extend its downward trend.
BTC/USD has reversed from the lower trendline of the falling wedge formation discussed in our previous analysis. The interim selling action in the futures market could invoke bitcoin to retest wedge support, after which the market would have a better probability for a rebound. The RSI momentum indicator has been inside an oversold territory for a while, expecting a future reversal.
BTC/USD Intraday Analysis
As BTC/USD consolidates, forming a bearish pennant, we are looking at the symmetric triangle for potential entry/exit levels. Also, we are testing 4493-fiat as our interim resistance, and 4296-fiat is acting as our interim support level.
We are first looking for a break below the triangle support, which would validate 4246-fiat as our potential downside target. A short position towards the said level looks profitable, but maintaining a loss just 2-pips above the entry level would minimize losses should the downtrend reverse.
Similarly, a bounce back from triangle support will have us put a long position towards 4493-fiat. At the same time, a stop loss order just 3-pips below the entry level would define our risk management in the near-term.
If either of the interim resistance or interim support levels is broken, we will switch to our breakout strategy. That said, a break above 4493-fiat will have us enter a long towards 4568-fiat, while a stop loss just 3-pips below the resistance level would protect our losses. Similarly, a break below the support level will put us on a wait-and-watch approach, because of the market’s inability to find a bottom.
Featured Image from Shutterstock. Charts from TradingView.