Bitcoin Price Action Setup: Down But Not Out

Bitcoin, BTC/USD – Technical Outlook:

• Bitcoinits recent retreat appears to be part of the consolidation that began earlier this month.
• The two-month uptrend remains intact.
• What are the most important levels to watch?

BITCOIN TECHNICAL OUTLOOK – BULLISH

The pullback in recent days in Bitcoin appears to be a consolidation rather than a reversal of the two-month uptrend, at least not yet.

Bitcoin has pulled back from a tough barrier at the August 2022 top of 25200, near the 200-week moving average (now around 25100) – a possibility highlighted in the previous update. See “Bitcoin Doesn’t Seem to be Ripe for a Bullish Break Just Yet”, published February 19. Also, as highlighted in recent weeks, BTC/USD needs to clear 25200 for the medium-term downward pressure to ease, including the August 2022 high. (See the update from mid-January.)

BTC/USD Daily Chart

Chart created using TradingView

Momentum on the daily charts has been saturated given the pace and scale of the rally since the start of the year, and the drop last week below immediate support on a horizontal trend line from late January at approx. 23800, confirms that the upward pressure has eased a bit. Overall, last week’s price action is further evidence that the jump in mid-February was part of a broader consolidation that started earlier this month.

BTC/USD Daily Chart

Map created by Manish Jaradi using Metastock

The color-coded candlestick charts, based on trend/momentum indicators, suggest that the current softness is a consolidation phase within the overall bullish phase. If this is indeed the case, BTC/USD needs to hold above immediate converged cushion at 19500-21400 (see daily chart).

BTC/USD 240-minute chart

Chart created using TradingView

Any break below the converged support would confirm that the two-month uptrend had reversed. Such a break would be part of the broader base-building pattern in cryptocurrencies since mid-2022 (see mid-November update). In this regard, the average true area based indicator on the weekly chart is showing preliminary signs that the downtrend may be starting to reverse.

BTC/USD weekly chart

Map created by Manish Jaradi using Metastock

— Posted by Manish Jaradi, Strategist for DailyFX.com