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Chart of the Day: Bitcoin on Path to $10,000

Published 11/09/2022, 08:09 AM
Updated 07/09/2023, 06:31 AM
BTC/USD
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Bitcoin extended a selloff for a fourth straight day in its worst slide since June. The cryptocurrency has been ranging for nearly five months since reaching its June 18 low of $17,611, its lowest level since November. 26, 2020.

Bitcoin slumped yesterday when a digital bank run on FTX prompted competitor Binance to liquidate FTX's FTT token. There had been rumors about FTX on social networks and its CEO Sam Bankman-Fried claimed that a "competitor is trying to go after us with false rumors."

Will Bitcoin recover? I don't know. Based on technical analysis, I predicted in January this year, when BTC was trading around $43,000, that it was heading to $30,000. At the time, many were suggesting Bitcoin could reach $100,000 and beyond. Let's look at the current chart.Bitcoin Daily

Bitcoin completed a descending triangle—a range in which bullish attempts to recover lose steam with each rally until the pattern ends with a downside breakout. While sellers continuously compromise on their offers, buyers' bid remains steadfast, demonstrating that sellers are either running out of supply or converting to buyers.

The previous falling trendline from the November all-time high was interrupted when the range broke through. However, yesterday's trading registered a new low, enabling me to redraw the falling trendline to include the structure. Note how the 200 daily moving average (DMA) realigned with the recent downtrend since April, having resisted the price in March.

This bearish pattern resumes the downtrend from the previous pennant, which was the breakout of a massive top, as seen in the chart outlined in my January call.

Target

When you measure the pattern's height between the Aug. 15 high and the Oct 13 low you get a $7,003 presumed move from the $18,307 breakout, targeting $11,304. Will it get there? I do not know. Based on technical analysis history, the price does make the move statistically.

Trading Strategies

Conservative traders should wait for the price to close below the pattern for at least three days, then attempt a recovery that will fail, confirming the pattern's integrity, before risking a short position.

Moderate traders would be content with a two-day filter to avoid a bear trap, then wait for a return move for a better entry, if not for confirmation.

Aggressive traders can short at will, according to their strategy that incorporates their timing, budget, and temperament. Here is a generic plan:

Trade Sample - Aggressive Short

  • Entry: $18,000
  • Stop-Loss: $19,000
  • Risk: $1,000
  • Target: $15,000
  • Reward: $3,000
  • Risk-Reward Ratio: 1:3

Disclaimer: At the time of publication, the author had no positions in the securities mentioned.

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