Bitcoin rallied on Monday to start the week, bouncing off the $10,500 level as support and closed slightly above the 50 Day EMA around $10,700. This is a slightly bullish development but with a heavy grain of salt, as Bitcoin is still trading well within the parameters of this tightening triangle. However, it is at the top of the triangle's range, so depending how the next few days shake out, Bitcoin could be looking up and not down.
(October 5, 2020 7:00 PM EST)
Support: $10,000 continues to be massive support. The 50 Day EMA is a battlefield at this point even though we are slightly above it. The $10,500 level appears to be acting as shorter term support, so look for bounces there. If BTC falls below there and then $10,000, look for support at the 200 Day EMA around $9,600.
Resistance: The 50 Day EMA is immediate support, as I can't call it support until BTC breaks clear above it, pulls back lower, and successfully tests it as support. If BTC breaks impulsively above the 50 Day EMA, look for a move to test $11,000 again. If it can break above $11,000, then I think the triangle has been resolved and we have an upward bias, at which point look for resistance every $1,000 until $20,000, at which point we might start seeing multiple thousand moves overnight. But let's not hold our breath, as there's a lot to be done before we're at that point yet.
Outlook: Bitcoin's tightening triangle pattern now almost has a bullish tone to it, but I'm not going to get ahead of myself. It is still very much neutral and could break in either direction. I think we get our answer soon, as the triangle is getting very narrow - you can see in the zoomed out chart above that we are seeing higher lows and lower highs. If we see a close above $11,000 this week, I think we have our answer. However, based on the previous price action, I think this consolidation pattern ends in BTC breaking down. I would like to be proven wrong, of course, but I'll let the candles tell us where we're going next. Gold and equities have been on a tear of a corrective rally over the past week or so, largely thanks to rallying yields ahead of treasury auctions happening this week and IRA inflows. However, those appear to be short-lived, and I think the selling should resume later this week, in which case these may drag down BTC with it, thus resolving the triangle to the downside. Stay tuned, October is a wild month in the markets.
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