BTC/USD Technical Analysis – 6th May 2014

Once again Bitcoin has tested multiple key support and resistance zones, threatening to break them, were it not for some

Once again Bitcoin has tested multiple key support and resistance zones, threatening to break them, were it not for some intriguing price action taking place – although it’s now clear a break shall definitely ensue within the coming few days.

Let’s take a closer look at the latest BTC/USD chart on the Daily timeframe (click to expand):

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btcusddaily_06_05_2014

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I’ve performed the Fibonacci study from the low of April on the 11th at 342, until the latest swing high on the 16th at 544. I’ve also drawn two lines, a bearish red trendline and a horizontal blue support line, I want to focus on these, because very soon, one of these will have to give.

Firstly the red trendline – today is the fifth day that price has tested this line over the past week or so, however, and this is very important, barring the first one, none of the candlesticks that tested this trendline have been bull candles – i.e. it has been the upper wicks of these candles that have been testing the line – when this happens, it’s usually a sign that price is happy to obey the line.

Whereas if we look at the blue horizontal support line, it’s been tested only twice, and both of these tests were bear candles. So the triangle that’s formed is going to be broken this week, that’s a given, and I continue to hold what I mentioned in yesterday’s analysis, “If a bearish break out occurs, we may see a drop to 78.6% Fibonacci level, but don’t expect that to occur during the early part of this week”.

And in contrast to what we were experiencing yesterday, the Bollinger Bands are now starting to head down again, aided by a number of corroborating technicals, including the Parabolic SAR dots above the candles, along with the Accelerator and Awesome Oscillators turning red. The Stochastics however still worry me. They’ve been so close to oversold territory for a number of days now, with the %K line crossing above the %D line on the 3rd of this month, only for that to be close to reversing, possibly by tomorrow, which would confirm my suspicion that the red trendline shall be adhered to, fuelling a drop to at least 400, a psychological whole number, i.e. a potentially strong support zone – we’ll have to analyze market action at that point to see whether it’d be able to sustain.

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