The recent sell-off in the bitcoin market has brought the price down by more than 15 percent in just five days. The downside action has appeared against the backdrop of a dwindling global economy, shaking the beliefs of many who consider bitcoin as a safe-haven asset against gloomy macroeconomic sentiments. The absence of big hedging moves is strengthening the cryptocurrency’s bearish bias in the near-term.
But, says Scott Melker of TexasWest Capital, a downside move in bitcoin charts should not become one’s instinct of panic-selling their holdings. The cryptocurrency analyst stated today that it is time for investors to do nothing: neither sell nor buy – not until the market establishes a clear bias.
“Don’t get chopped up trying to trade bitcoin right now,” said Melker. “Best to wait for a clear move on a higher time frame and not swim with the whales while they’re playing games. This price action is likely to abuse bulls and bears alike.”
“Nothing confirmed” as Bitcoin struggles near the $10,000 Level | Image Credits: Scott Melker
The analyst noted that bitcoin is making a Bear Flag, a bearish pattern reflecting an asset’s minor surges while pursuing a broader downtrend. An overhead resistance near the $10,300 level is capping bitcoin from declaring a stronger interim bull bias. Melker said he wants to see at least the cryptocurrency breaking above the midline of the Bear Flag. In the absence of such price actions, bitcoin will remain in a bias-conflict.
“I see no reason to trade this at the moment,” he added. “That said, watching a potential bear flag forming with price struggling to break above the EQ (midline). Also, I still view the $10,300 area as a key level that I would like to be above, not below. Nothing confirmed here for me.”
Bounce Back Calls
Bitcoin trending inside bull pennant | Image Credits: TradingView.com
The broader price strokes in the bitcoin market show the asset trending inside a Bull Pennant structure. The pattern typically forms after traders catch their breath after a big upward move before they continue the price rally. Before the pennant formation, bitcoin had surged by over 200 percent in an aggressive bull run. As of now, the cryptocurrency appears to be catching a break.
That said, the price, like the previous times, is testing the Pennant support, awaiting a bounce back towards the Pennant Resistance. Bitcoin would likely bounce between the two trendlines until it reaches the apex of the Pennant structure. After that, the price could attempt a breakout at least equalling the height of the Pennant. That could take it much above this year’s peak of $13,868.44.
But, as Melker noted, it is wise to test the wait-and-watch approach. A break below the Pennant support can confirm the analyst’s bear flag theory, meaning bitcoin would likely continue its downside correction.
