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If Bitcoin Breaks Below Recent Low, Deeper Correction Likely

By Bruce PowersCryptocurrencySep 12, 2017 12:30AM ET
www.investing.com/analysis/cryptocurrency-blockchain-bitcoin-btcusc-btcusd-trading-technical-200212671
If Bitcoin Breaks Below Recent Low, Deeper Correction Likely
By Bruce Powers   |  Sep 12, 2017 12:30AM ET
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Summary

  • Bitcoin forms potential Head and Shoulders Top at resistance of Fibonacci confluence
  • Breakdown likely leads to a -29% or greater correction

(Bitcoin) topped out at $4,979.90 last week before moving into a retracement that has so far seen a decline of as much as -19.6%, as of last week’s $4,001.93 low. That percentage decline approximately matches the previous two retracements, which were -19.6% and -18.3% respectively.

This likely means that if Bitcoin falls below $4,001.93 support with conviction, it is heading lower.

BTCUSD Daily
BTCUSD Daily

Prior Retracements

We can see on the above chart that each of the four corrections occurring from January to mid-July were approximately -29% to -38%. Therefore, if last week’s low is exceeded to the downside, a minimum decline of -29% can be anticipated and up to at least -38%. That would put the targets for Bitcoin, following a breakdown at approximately $3,535 to $3,080. The lower price target completes a 61.8% Fibonacci retracement of the uptrend begun from the July swing low.

Is there any supporting evidence to suggest that the $4,979.90 peak may stop the ascent for now? It turns out there is some evidence. Last week’s high is in a resistance zone of three Fibonacci price resistance levels. These can be seen on the weekly chart below and include a 461.8% retracement, a 141.4% projection, and a 261.8% retracement.

BTCUSD Weekly
BTCUSD Weekly

Head & Shoulders Top

Further compounding the short-term bearish case is the potential head and shoulders top now present on the daily chart. A breakdown trigger occurs on a move below $4,001.93 with the minimum target approximately $3,024, based on the measurement of the pattern. That target is also very close to the 61.8% retracement thereby increasing the significance of the $3,080 to $3,024 target zone.

BTCUSD Daily
BTCUSD Daily

If Bitcoin Breaks Below Recent Low, Deeper Correction Likely
 

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If Bitcoin Breaks Below Recent Low, Deeper Correction Likely

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