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An analyst has explained how Bitcoin could witness a drop to the $40,600 level based on a pattern forming in its 2-month price chart.
Bitcoin Has Seen A TD Sequential Sell Signal On Its 2-Month Price
In a new post on X, analyst Ali Martinez has discussed about a Tom Demark (TD) Sequential signal that has formed in the 2-month price of Bitcoin. The TD Sequential is an indicator in technical analysis (TA) that’s generally used for spotting positions of probable reversal in any asset’s price.
This indicator involves two phases: setup and countdown. In the first of these setups, candles of the same color (that is, whether red or green) are counted up to nine. After these nine candles are in, the asset could be assumed to have reached a point of turnaround.
Naturally, if the candles that led to the setup’s completion were green, then the TD Sequential would give a sell signal. Similarly, red candles could suggest a bottom may be here.
Once the setup is done with, the second phase of the indicator, the countdown, begins. The countdown works much like the setup, with the main difference being that candles here are counted up to thirteen, instead of nine. Following these thirteen candles, the asset may be considered to have reached another potential top or bottom.
Bitcoin has completed a TD Sequential phase of the former type recently. Here is the 2-month price chart of the cryptocurrency shared by the analyst, which shows this signal:
As displayed in the above graph, the Bitcoin 2-month price has recently finished a TD Sequential setup with nine green candles, implying that the cryptocurrency may have encountered some kind of top.
Since the signal has appeared, BTC has been on the way down, with its price currently under the $57,000 level. Thus, it’s possible that this pattern’s bearish effect may already be taking hold.
As for how deep this drawdown can take Bitcoin, Martinez has pointed out the support level at $51,000. This level corresponds to the 0.236 Fibonacci Retracement level from the recent BTC top.
Fibonacci Retracement levels are based on the Fibonacci series, where dividing each number (beyond 5) in the series by the next numbers produces ratios that are consistent throughout the series.
It’s possible that Bitcoin may find support at the next such important ratio, but the analyst notes that if the $51,000 support gets breached, the cryptocurrency could end up going all the way down to $40,600, which corresponds to the 0.382 Fibonacci Retracement level.
In the scenario that BTC does end up revisiting this level, its price would have gone through a drawdown of more than 28% from the current level. It now remains to be seen how the asset’s trajectory plays out from here.
BTC Price
Bitcoin has furthered its latest decline during the past day as its price has now slipped to $56,600.
