Bitcoin Price: The Correction Has Commenced
The blowoff top did occur as price reached a high of ~US$500, before running into what is an area of major overhead supply.
The last article stated:
“The bull trend continues to look very strong. 13 of the last 15 days have been green […]. The indicators all remain overbought and extremely elevated. A blowoff top seems to be forming but that can take the price much higher than here. As noted, when the indicators start to diverge from price, it could be a top forming for now that has not happened. As the chart below shows all the indicators are at yearly highs. Price has also moved out of the top of the Bollinger Bands, which shows it’s moving into an extreme position.”
The blowoff top did occur as price reached a high of ~US$500, before running into what is an area of major overhead supply. All of the indicators were flashing signs of extreme overbought conditions and while they have come off a bit as the price has declined they are still elevated even following the price decline of the last few days.
The RSI has formed a double top and is now correcting. The MACD is starting to roll over as well but is still extreme. The DMI remains extreme but buying pressure is subsiding, which should lead to a correction as well.
What is important here is how price consolidates and at what levels. This goes for the indicators as well.
As the chart below shows, an evening star pattern has formed which is a three candle topping pattern so further price declines should be expected with immediate support below coming in at US$360 and US$330. Major support can be found in the US$315 and then the US$300 range. In order for the bulls to stay, price must hold at the major support levels as it continues to decline and consolidate.
Notice also the wicks, which have formed from those huge moves. They will provide some overhead resistance as well as they are now major supply zones.
The weekly chart remains bullish too, for now. However, an evening star may be forming there as well. This weekend and next week could tell the tale for that chart as well. The RSI is slightly overbought but bullish and the Money Flow Index continues to be bullish.
This price surge has turned all the price charts into bullish positions for bitcoin. After the extreme move that happened, a snapback was expected and this is what is happening. How price consolidates will tell if this was just a speculative move fuelled by a Ponzi Scheme and Chinese evading capital controls only to deflate back below 300, or if this breakout can hold it for real.
Bitcoin has not been able to hold above US$300 for an extended period time all year. As long as the pullback stays above US$315-$300, a healthy consolidation should occur and buying this dip is recommended. Buying before this would not be prudent.