Bitcoin Bearish Weekly Close: $76K Support Still Holds

The Bitcoin price suffered a lacklustre close below $77K on Sunday in the weekly chart. That said, the current support floor of $76K did hold, and the $BTC price is trying to bounce back on Monday morning. With the Federal Reserve interest rate decision on Wednesday, and a 25 basis point hike expected by the market, is the Bitcoin price about to drop out of its bull flag and head back down to the lows?

Breakout of small descending trendline

Source: TradingView

At least in the 4-hour chart, the $BTC price action looks reasonably bullish. The price has come back down to the bottom of the parallel channel, has bounced, and has broken out of a small descending trendline. Unlike previously (note the long wick to the upside) this time a couple of new candles have opened above the trendline, meaning that the breakout has been confirmed, at least in this short time frame.

It may be that the $BTC price comes back down to confirm the descending trendline again, and to perhaps come down a little further to retest the $77K support level, but generally this does look like a reasonably reliable breakout so far. $78,900, and then $79,500 are the short-term targets.

Potential head and shoulders forming in daily time frame?

Source: TradingView

This is very much speculation so far, but out in the daily time frame a head and shoulders pattern could be forming. It just depends if we get a right shoulder over the next few days which then breaks to the downside. Interestingly, the measured move down and out of the parallel channel comes back just about exactly to test the 200-day simple moving average (SMA). 

As can be seen in the above chart, the last time the 200-day SMA was tested was when the $BTC price made its last big local high. Then it was resistance, and later, during the last big rally, the price burst through the 200-day SMA. Would it not make sense for the price to come back and confirm such an important moving average as support this time?

Bearish markers in the weekly time frame

Source: TradingView

Zooming right out into the weekly time frame we can see the huge breakout of the bear market trendline. A flag has formed at the top of that huge breakout, and although the flag is not tilted down like a classic bull flag, it is providing the channel within which the typical consolidation period before the next breakout is potentially taking place.

Therefore all would seem well… isn’t it? Perhaps, but there are several bearish cautionary markers it would be good to be very aware of. Firstly, as it stands, the $BTC price has still not succeeded in making a higher high. Secondly, the shooting star candle of around 3 weeks ago is still casting its shadow over proceedings considering that these types of candles are generally found at the tops of rallies. Thirdly, the Stochastic RSI indicator lines are crossing down. If they get below 80.00, this would signal that upside price momentum is dissipating. 

If a rate hike is announced by Fed Chair Warsh (the CME Group FedWatch Tool is currently at 88.5% in favour of a 25 basis point hike) at Wednesday’s FOMC meeting, this is likely to have a wet blanket effect over the US economy, which is very likely to filter through into the $BTC price. This may be the news that finally breaks the ongoing sideways consolidation, but to the downside. Proceed with caution.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.