Bitcoin pulled back a bit on Wednesday, initially rallying before the sellers took over, printing a new high but closing the day in the red. Bitcoin put in a marginal new high but quickly turned around, forming an ugly inverted hammer, which usually denotes exhaustion and a possible trend reversal.
Outlook: Bitcoin initially rallied then fell during the Wednesday trading session, making another swipe towards the $20,000 level before giving back the gains, closing the daily candle just underneath $19,000. This is starting to look like a topping formation as Bitcoin's momentum seems to be running out. Though BTC continues to put in a new high day after day, the rallies seem less impulsive and are decreasingly in magnitude. If Bitcoin were to break out and above the $20,000 level just above which is the previous ATH, I think it's a blowoff top that'll likely be sold off or rejected in short order, most likely by $25,000. That's not to say it's unwarranted -- I just think this rally has gotten ahead of itself. We are heading into a long holiday weekend in the US so liquidity should be thin until early next week, so Bitcoin is subject to more easily manipulative weekend action as everyone's away from their computers. If Bitcoin were to pullback from here, look for a retracement to the $16,000 and ultimately $14,000 level, which is the top of a previous resistance channel and around the 50 Day EMA just above around $14,500.
That being said, I'm not a seller of Bitcoin whatsoever, but I do believe in the short-term, BTC is likely to pullback, which is fair given this parabolic rally of almost two months. It's time for Bitcoin to cool off a bit and digest the gains. The global macro economic environment continues to worsen which bodes well for fixed-supply assets like Bitcoin, which are poised to perform extremely well in 2021 and beyond. I'm a buyer on dips and continuing to DCA on opportunities to value.
Support: Look for support around $15,000, $14,000, or even $13,000 if we're lucky. On a weekly timeframe, I think a 30% retracement here is a median-sized pullback, and there are a semi-truck load of bearish socio-economic catalysts primed and ready to shake up markets over the next few months -- hell, few weeks.
Resistance: $20,000 is proving to be resistance as I projected, which makes sense as the previous ATH. If BTC breaks above $20,000 in the near-term, look for a blowoff top run up to $25,000, which I think probably gets sold into and a deeper retracement occurs before another medium-term run-up happens again. Remember, 95% - maybe 99% of the time, assets spend time in sideways consolidation trading patterns -- stark up or down moves only happen a small percentage of the time and do not last long.
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