Bitcoin languishes as AI trade makes a strong recovery

The Nasdaq 100 Index bounced back 3.4% on Monday, a huge increase in just one day, equivalent to around $1.1 to 1.3 trillion. A heavily oversold AI trade accounted for a lot of the gains. While gold and silver also made the most of the day, what did Bitcoin do? It ended the day pretty much flat, around 0.7% up. The $BTC price is already down 1.3% on Tuesday morning. Is a further big drop coming?

Strong bounce or $69K next?

Source: TradingView

The 4-hour time frame reveals the two parallel channels, one on top of the other, with the price action starting to bunch below the bottom channel, but above the horizontal resistance at $73,800. A descending trendline has been rejigged slightly, which the $BTC price has recently retested.

Another descending trendline has been drawn from the last lower high. This brings into perspective a small descending wedge. Should the price manage to break through the upper trendline, rather than the lower one, the bulls will have a chance to make something of it. A weak bounce and then another roll-over will certainly not cut it. It’s either a strong bounce, or the $BTC price is headed to $69K.

Horizontal support and 200-day SMA to provide the brake

Source: TradingView

The price action decline in the daily chart does not look as though it is going to come to a halt any time soon. That said, there is a possible brake that can be exerted at around the current level. This comes in the form of a pretty decent horizontal support level, and the 200-day simple moving average (SMA). Could a candle tail come down to test the 200-day SMA with the candle body remaining above the $73,800 support? That’s probably the bullish take. If the $BTC price falls through both supports, it's to the top of the 2021 bull market at $69K that we go next. Five years later, the Bitcoin price would be at the same level. That said, silver has just come down to the same level it reached back in 1980, and it does look rather bullish from here…

MACD cross-down but inverse head and shoulders to the rescue?

Source: TradingView

In the weekly chart, if we first look at the MACD indicator, it can be seen that historically the crossovers of the blue MACD line with the red signal line have all resulted in some fairly dramatic corrections. However, if we come forward to today there does seem to be a difference. While it does rather look like there is going to be a cross down in the MACD, the price action made its top a couple of months ago. They don’t match up? Yes, the MACD is a lagging indicator, but 8 weeks does seem a bit of stretch. Could it be that the indicator lines either do not cross, or they have a very shallow cross down before crossing back up again?

Over to the green shaded area. This is the potential formation of a giant inverse head and shoulders bottoming pattern. The right shoulder could come all the way down to the bull market trendline and still not invalidate the pattern. It may be that there could still be some downside to come, but in the grand scheme of things this pattern could push the $BTC price all the way up to $116K.

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.