Bitcoin established a clear range early in the week and consolidated up until today.
The range was established between $3900 and $4075, both of which have acted as resistance points in recent price action.
Although price action surged on Sunday, it failed to surpass the prior high and returned with the range.
The lower highs are indicated by the arrows on the above chart.
Typically the longer price action consolidated, the more likely it is to break out by breaking through support or resistance level.
This was the case today as price action underwent a sharp drop and did not stop at $3900 which was expected by many to act as support.
The 4-hour chart shows more clearly the levels making up the $3900 to $4100 range.
The recent price drop took place on large volume quickly breaking through the lower end of the range.
Many traders may have sought to take short positions on a pullback towards $3900 but price only slightly pulled back up.
Price looks likely to continue its downward trajectory.
Recent price action on the 4-hour shows consolidation increasing the likelihood of a bear flag forming where price follows up with another significant drop.
- Price ends a consolidation which it has been forming all week with a bearish drop.
- No respect for the lower end of the range as price quickly breaks below.
- Recent price action on the shorter timeframes shows consolidation increasing the likelihood of another significant move to the downside.
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