Days and days of sideways consolidation and tightening volume has been the name of the game for the bitcoin market. A narrow range of $200 has caused a weeks worth of activity to coil and consolidate in preparation for bitcoin’s next move:
Figure 1: BTC-USD, Daily Candles, Narrow Range
The figure above shows just how narrow the range has been over the last week as the market has continued to grind out support and fail to break above overhanging resistance. The thick, blue line shows a prior support level that is now resistance. The lower highs and the lower lows are continuing to show signs of diminishing demand and continuing supply on the macro scale. However, if we look at lower time frames, we do see some signs of potential accumulation:
Figure 2: BTC-USD, 4-Hour Candles, Potential Accumulation Range
A closer look at the narrow range shows a well-established horizontal boundary (shown in green) with consolidating volume. The one and only candle that breached the lower boundary of the range occured on low volume and was immediately rejected on relatively strong demand pressure. The consolidating volume and tight, narrow spread at the lower boundary of the trading range is often a sign accumulation is taking place. However, it should be noted that these low volume/low liquidity conditions make it fairly difficult to read trading ranges.
If this range proves to be an accumulation, we should look for a daily close above the blue level, and, ultimately, a close above the green trading range shown below:
Figure 3: BTC-USD, Daily Candles, Immediate Resistance and Support Levels
If we manage to close above the green trading range, we can expect to see a test of the upper, macro range (upper blue line). From there we will have to reassess and see if we can close above that level. However, if we pop a new low and close below the current, green trading range, that would likely yield a shove to retest prior lows in lower $3,000s. For now, we are currently tightly coiled and ready for the next big move. Due to the low volume/low liquidity conditions, the volatility is high and it is advisable to wait for a daily close to gain a more objective standpoint of the market conditions.
Summary:
- A tightly bound market has the market ping-ponging within a $200 range over the last week.
- There is a decent argument for an accumulation range on low time frames, but the markets are highly volatile so its best to wait for the daily signals for a stronger view of the market.
- Because the market is so tightly bound between support and resistance levels, a close below or above the outlined levels will likely yield a strong continuation in the direction of the breakout.
Trading and investing in digital assets like bitcoin is highly speculative and comes with many risks. This analysis is for informational purposes and should not be considered investment advice. Statements and financial information on Bitcoin Magazine and BTC Media related sites do not necessarily reflect the opinion of BTC Media and should not be construed as an endorsement or recommendation to buy, sell or hold. Past performance is not necessarily indicative of future results.
