Further Downside for Bitcoin Followed by Massive Upside: An In-Depth Analysis
As mentioned in my previous post, I'm currently in a short trade, and I expect further downside for the time being. Consequently, I'll keep this trade open while targeting the levels discussed below in detail.
Presently, Bitcoin trades at the 27,415 level, having broken and closed below the ascending trendline highlighted in the 4-hour chart below.
Following the trendline break, I've added a 1 to 1 extension, extending from the anchor high above the trendline to the actual break. This yields a target of 25,011. The image below illustrates this extension and my current open short trade from 27,876.
The trendline break offers a potential target, but I'm also paying close attention to other key levels. Let's examine them one by one.
- Liquidity level: The March 27th swing low at 26,505 could prove pivotal. A break of this level may attract new shorts, with the potential for traders to get caught on the wrong side. Watch for a break of this level followed by an immediate close back above it, as this could signal a turning point for significant upside. See the chart below:
- Weekly nPOC: At 24,855, slightly below the 1 to 1 extension of the ascending trendline, we find a weekly naked point of control. If we continue downward from the liquidity level, the weekly nPOC should take precedence over the 1 to 1 extension, although their proximity makes this a minor concern. As volume attracts price, this level is another crucial zone to monitor.
- 21 Weekly EMA: The 21 weekly EMA, currently at 25,389 (though subject to fluctuation), often acts as a robust support level during strong uptrends. We may see the price break through this level and then retrace back above it. This level serves more as an indication of a potential price bounce rather than an entry point.
Daily Level: Finally, we have a daily level at 24,366, which I consider my last possible turning point. A break and close below this level will prompt me to reevaluate my current upside bias.
Trade Plan
I've compiled all details into a single 4-hour chart below (click the image for a full screen).
The liquidity level (1) is crucial for me and will be the primary focus. A break of that level followed by a close back above it will be a possible entry point for a long trade.
The 21 weekly EMA serves more as a zone I'd like to see the price remain above to maintain my bullish bias.
The 1 to 1 extension, along with the weekly naked point of control, is another area where I'll consider a long trade. Ideally, I'd like to see a sharp move down to this level followed by an immediate, strong reaction to the upside.
As always, I'll set my stop losses immediately upon entry.
To be continued...