Strong Bitcoin Correction - 2 Reasons Why, Plus Technical Analysis for 9-3-2020
/TWO KEY EVENTS THAT INFLUENCE THE BTC CHART
While Bitcoin is in the midst of a strong correction, there are two other events happening which I believe have a direction influence. What are they?
1) The stock market dumping
2) The US Dollar rallying (DXY)
In history, we have observed that Bitcoin has a tendency to move in the opposite direction of a rallying US Dollar. Looking at the DXY chart, we have seen a short-term rally taking place over the past several days that coincides directly with the Bitcoin correction.
If you add in a stock market dump, and you have a resulting strong BTC correction. Take note that the Dow Jones Industrial Average got dangerously close to the previous high, before a harsh selloff ensued.
But let’s shift the focus to the Bitcoin chart provided by TradingView, and see if we can gather some clues as to what will happen next with this sizeable correction.
Looking at the 4-hour chart, we see that BTC met resistance at the magical 4.618 fib circle boundary. It then briefly clung to the 4.236 (sorry about the typo on the chart) before failing, and it blew straight through the 3.618 fib circle ring without pause.
With heavy sell volume happening already, and then the formation of that big fat ugly red candle that pounded the price down, there’s no telling where the price will land and find support now that we have sunken through the 3.618 fib circle ring. That was an important level to hold. The stochastic is very bearish, and we are making a definite move into the oversold zone where it could languish long enough to drop the price down a bit more.
When will the selling stop, you ask? The only possible landing point I can see is the CME gap set in July of 2020 at $9700. With over $348 Million in Bitcoin contracts that were liuidated in only 4 hours during this dump, the momentum looks like a train headed downhill that won’t even think about stopping before hitting that CME gap. I don’t have any doubt that the bulls will come out of the gates and go on a stampede IF we make it down to that CME gap. This might be the last chance to pick up on your favorite alts and buy Bitcoin at sub-$10k prices.
If we zoom in and look at the 1-hour chart, we can pick up a few more indications of how strong this event is on the micro level.
There is a definite death cross formation as the 50-day EMA crosses the 200-day EMA on this chart, and this is the designation given when both moving averages are on a downward slope. The 200-day EMA is just slightly sloping downward, but this is still indicative of a death cross, as evidenced by the harshness of the correction.
The 1-hour chart is just evidence to show us that this correction is significant and strong on the micro level, and it gives us a better picture of how things are developing while we are in the midst of the dive. I’ll be keeping track of the price movement on the 1-hour until we get to that CME gap, because there will be some buying decisions happening on my end!
Carlton Flowers
The CryptoPro
NOT FINANCIAL ADVICE - Entertainment purposes only. Seek a qualified investment advisor before making any decisions on purchasing cryptocurrencies.
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