At the beginning of the month we wrote the piece The Trend WAS Your Friend. As we discussed, we had seen a very strong rally for a 2-month period without much of a pullback at all. BTC peaked around $14,000 on June 26th and has been trading in a very volatile but downward trend ever since. In the chart below will describe what we are seeing.
Starting in early May, we have drawn an upward sloping channel in purple to represent the 2-month rally. On May 14th, 27th, and 30th, we saw some selling pressure keeping BTC within the purple channel. The week of June 5th-12th BTC tested the lower bound of this channel and also held. The following two weeks BTC rallied and saw a cluster of resistant at the orange circle, however the upward momentum drove it higher into well overbought territory. As we stated in our July 2nd piece, “This parabolic rally higher in BTC was certainly unsustainable, and needed to come to an end. Where can we look for support?” This is where the story changed.
From here we point out the 3 LOWER HIGHS, in magenta, and the 3 LOWER LOWS in blue. That formation certainly is a bearish sign however, the 4th low in black is higher than the preceding low. We are also on the very fringe of the low end of the purple channel drawn at the start of this bullish move.
These two major formations, the longer trending Bullish channel, and the shorter-term selloff, seem to be coming to a crossroads. And this crossroad appears to be the visually important $10,000 level. We have been monitoring this key level in previous pieces, discussing the bearish attempts to sell BTC lower, however the bulls have been able to defend it to date.
We are discussing internally some potential derivatives trade ideas off of these converging technical patterns and will post them shortly.