In my yesterday’s analysis, Trapped Again, I had mentioned that a breakdown below the $280-mark could lead to a free-fall in the Bitcoin price. Bitcoin cracked below $280 and is now roughly worth $250.
The sudden collapse might have taken many by surprise, but the technical indicators were foretelling this. Now, the same indicators and the reformed chart structure are revealing some very noteworthy details.
Bollinger Bands – The crash in Bitcoin price has severely stretched the Bollinger Bands on the lower end, which implies that a temporary support might set in soon.
Fibonacci Retracement – The Fibonacci retracements present some very interesting yet crucial technical support information. The current value of $253.72 is extremely close to the 50% retracement level of $254.25. 50% retracement level could prove to be a temporary base and the digital currency is expected to rebound to 38.2% Fibonacci retracement level of $264.58 in the near term. I expect selling to resume post a rebound and Bitcoin should touch $230, i.e. the 76.4% retracement of the entire rally which started from early February and peaked out on March 12 at $298.
Relative Strength Index – The RSI reading are in deeper in the oversold territory with value at just 15.6070. The grossly oversold cryptocurrency may stage a quick comeback, but even that may be insufficient to suppress the bears for long.
Moving Average Convergence Divergence – The MACD value has dropped drastically to -7.7643 while the Histogram value is -4.5019. Consolidating at current levels will support the Histogram value in the near term.
Even though the Bitcoin price may rebound in the near term, I maintain a negative view, with a medium-term price target of $230. Rallies should be used to go short on the cryptocurrency and long positions should be built with strict stop losses only. $230-odd levels may prove to be great long-term investment opportunities.