Bitcoin is sticking like glue to a key Fibonacci level, as the market reaches a period of consolidation, with the trading range getting narrower as time passes. Indeed, what we’re seeing playing out this morning on Bitcoin is a typical Bollinger Band “Squeeze”.
Let’s take a closer look at the current BTC/USD chart on the H4 timeframe (click to expand):
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I’ve performed the Fibonacci study from the high at the end of March at 589, until the month’s low at 410.
What we need to focus on is the latest dozen or so candles and their price action. Look at how their bodies have been getting smaller, resulting in the Bollinger Bands getting tighter. According to the founder of these Bands, John Bollinger – the periods of low volatility are often followed by periods of high volatility. Therefore, a volatility contraction or narrowing of the bands can foreshadow a significant move up or move down.
And of course we have the 23.6% Fibonacci retracement level acting as a resistance level. Even though we have other technicals telling us there could be a break of this level soon, the fact that we have a squeeze in place right now leads me to hold we could see the resistance continue for some time yet.