After yesterdays drop, price action in Bitcoin has slowed down at the upper trend line of the triangle pattern it had formed since March. Bitcoin recorded bullish movements for most of this week as it broke through the triangle pattern to the upside. Yesterdays drop was significant and erased two days of gains, but price action now seems to be finding some support at the upper trend line.

Bitcoin Daily Chart – Source:

The drop results in the opening and close of the weekly candle being about even. The last two weekly candles have closed at the same point as the open, resulting in Dojis. Dojis are candles with small bodies and little or no wicks. This shows some indecision in the market. Much of the movements this week look like bullish developments, but there still may be not enough confidence from buyers to drive the price up from here after a year of hard losses.

Three Dojis for Bitcoin Weekly Chart – Source:

The hourly chart shows the drop in more detail. Although there was some support by the hourly 200 EMA, price broke the barrier and traded to the upper trend line of the triangle. Price action has had around three touches at this support point. More touches make the level progressively weaker with fewer buyers to hold the level each time.

More trading around this area increases the likelihood that price will drop from here. The outlook is bearish if price drops from here but a consolidation or sideways trading would likely be bullish and give buyers the opportunity to accumulate. If price action continues to trade below the 200 EMA, the 50 EMA will cross it to the downside resulting in a death cross. A death cross is perceived as a bearish signal and will likely result in an increase in the number of sellers.

Bitcoin Hourly Chart – Source:

Key Takeaways:

  • Yesterdays drop erases the week of gains for Bitcoin.
  • The prior to weekly candles have been Dojis for Bitcoin, and the drop makes this week’s candle a Doji also. Dojis show indecision in the market.
  • The drop has met support at the upper trend line of the triangle pattern, but it has touched multiple times. Each touch makes the level progressively weaker.
  • A death cross may be upcoming on the hourly chart and result in more sellers.
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