After what has been called a crypto winter, things could be turning for bitcoin and cryptocurrencies. Yes, I understand we had the FTX news, and now some Gemini and Genesis news. But the charts are telling a different story.
Before I begin on the charts, I want to highlight something I have always said about bitcoin and cryptocurrencies. These assets act as risk on assets. Meaning they tend to follow the price action of the stock markets. A risk off environment sees risky assets be sold off and money running into the safety of the US dollar and bonds. We are seeing the cratering of the US dollar, but bonds are rising. People currently are not buying bonds for safety, but betting on the Fed to either pause or pivot. If this is near the top of interest rates, then you want to buy bonds yielding higher before yields drop.
Now to the charts. Let’s do something a bit different. Let’s breakdown bitcoin from the larger time frame to the lower time frames. Something for everybody.
This article is being written on a Friday, the end of the trading week. And I have just spotted something on the bitcoin chart where today’s Friday close will be highly significant. Bitcoin could be closing back above a major weekly zone.
Let me refresh your memory. Bitcoin was holding this $18,500 zone as support. We held and bounced from here in June 2022 and October 2022. But the week of November 7th 2022 saw bitcoin sell off and confirm a close below this major support zone.
We had a breakdown, and now $18,500 acted as resistance. You can see we even had a weekly touch and rejection of this resistance zone on the week of December 12th 2022. According to technical analysis, when a breakdown occurs and price remains below the new support now turned resistance level, we should expect the downtrend to continue. This is why many technical analysts had a target of around $12,000 for bitcoin.
Now you may understand why today’s Friday close is very significant. If Bitcoin CLOSES above this resistance zone by the end of Friday, we would have a false breakdown. This sets us up for a reversal and a major move higher.
My preferred time frame is the daily chart. You can see that when we broke down in November, price could not take out previous lows. Instead, we began to range. Now, we have a breakout above our resistance zone. But hold your horses, because we need a strong confirmed close. Yes, Thursday’s candle did close above the resistance zone. And yes, the green candle was large. But for a breakout, I want to see the body of the candle penetrate higher above my resistance zone. This did not happen, but one can argue the large green candle means the momentum will continue and Friday will confirm a nice green breakout body candle.
The arrows I have drawn are not necessarily targeting certain price levels, but are the type of price action I would expect to see with bitcoin climbing back above this resistance zone. What was once resistance now becomes support, and breakouts tend to see a pullback for a retest before we move higher. As long as the price remains above $18,500 bitcoin bulls should remain excited.
For you intraday day traders, the 1 hour chart just confirmed a breakout. As a day trader, one would be going long on the breakout. Just looking to the left you will see what follows after an intraday breakout.
But let’s focus where we are now. The intraday has broken out above $19,000 and we are currently pulling back to retest the breakout zone. Normal breakout price action. If buyers step in here, then we can safely say our weekly and daily chart trigger criteria will be met.
To end off, I have the charts of ethereum and litecoin above. Same sort of set up as bitcoin for ethereum. The litecoin chart looks somewhat different. But what should draw your attention is the fact that both charts have already confirmed breakouts with a strong daily candle close above previous highs.
Ethereum will be heading to the $1700 zone as long as it holds above $1350. Litecoin is heading to $96.60 as long as it holds $79.75.