This week for Bitcoin we’re starting off on the 2 week chart as a new candle has formed after failing to break above the highlighted minor resistance zone – this has brought down our upper 2 week Bollinger Band Resistance to $7,400 – out of reach for the current timeframe, which suggests that Bitcoin could come down to test the 20 and 9 day Moving Average between the psychological support level $5,000 and the previous broken support of $4,500.
Jumping down to the 10 Day chart, not much has changed since last week, both the upper Bollinger Band resistance and Moving Average crossover remain the same as we await a new candle to form.
When trading cryptocurrencies it is advised to trade the price extremes due to the low liquidity and “highly emotional trading” in comparison to Forex in order to prevent “over trading” and being a victim of “stop hunters”. Therefore, we should be executing orders from the dynamic extremes such as entering a short if Bitcoin hits the 10 day upper Bollinger Band resistance at $6,300 (the most relevant “extreme” dynamic resistance level in relation to where price currently sits) or vice versa, entering a long if Bitcoin hits the support zone of $4,500-5,000.
Right now Bitcoin is hovering around $5,367, hence it is floating in between both extremes and it would be a mistake to attempt a position in either direction because in theory price could go either way in a very short space of time – its during these times that most traders find it difficult, to sit back an be patient “sit on your hands” and wait for the best opportunity to come to you, rather than chasing a trade which offers little in our favour.
Bear in mind that a new 10 day candle will form shortly, and unless there is some bullish price action pushing Bitcoin up to the $6,300 target we will see the new 10 day candle bring the upper Bollinger Band further down – which could well then act as resistance to push price down to the $4,500-5,000 region.
Stepping down onto the weekly chart we can see that last week (last night) Bitcoin closed just inside a resistance zone, though also notice how the current weekly candle no longer sits above the upper Bollinger Band, implying that Bitcoin is no longer overvalued at this point (hence it can still push upwards) but it is equally far away from support and could therefore fall – i.e. right now there is no real opportunity worth trading when trying to catch the wick extremes.
Minimising risk using this method is the best way to trade cryptocurrencies because whilst there may be few opportunities, when they do occur your stop loss can be extremely minimal, and there is less emotion and error chasing day trades.
On the daily chart here we can see things abit more clearly. The highlighted resistance zone where Bitcoin currently sits has been tested last week on the 23rd and 24th of April before being forced back below the resistance zone on the 25th, followed by an abrupt halt and pushing back up to test the resistance zone once more.
From the most recent push into the resistance zone we can see that Bitcoin failed to break above the previous high, and today it has created a new low (lower than yesterday) which suggests further down side is coming, however, as mentioned this highlighted resistance zone sits in between two extremes and we only advise taking trades from price extremes unless you are highly adaptive, reactive and familiar with the high volatility and low liquidity within the market.
Stepping down once more onto the 6 hour chart (quarter of a day, it tends to have “less of a poker face” than a 4 hour) we can see price trading inside this channel – the highlighted ellipse is where I entered a trade, and will simply move my stop loss to break even whilst keeping an eye on the chart in case we do see Bitcoin spike upwards to $6,300.
If Bitcoin breaks and closes below the channel then this could be used as another short entry down to $5,000-4,500