The 161.8% Fibonacci retracement is critical to tracking the Bitcoin movement
Earlier this week Cryptocurrency Guide Bitcoin (BTC) saw headlines spike when it took investors on one of its patented roller coaster rides. On Tuesday, June 22nd, Bitcoin fell below the $ 30,000 mark at the start of the session, before turning positive later in the day, settling in just below $ 33,000. On the same day, Bespoke had already made a brief comparison of BTC in its morning lineup with the recent action by bull traders, which said, “Cops look like they will have a little more gas in the tank afterwards [Monday’s] big rally as futures are modestly higher. Crypto assets are a different story, however, as Bitcoin just broke $ 31,000 and broke just under $ 30,000 thereafter.
– Matthew Timpane, CMT (@mtimpane) June 22, 2021
Also on the same afternoon, Schaeffer’s Senior Market Strategist Matthew Timpane tweeted the above, pointing out BTC’s arrival at the Fibonacci expansion of 161.8%. Similar to a Fibonacci retracement, the extension projects the position that stocks in a stock could move into next. These levels are often of interest to traders as they can help identify potential areas of support or resistance and indicate a good target price.
Digging deeper, Timpane notes that in the past, large risk-reward trades were built during the bull rally through weekly Fibonacci levels from December 2017 highs to December 2018 lows. So if we were to enter a bear market, why wouldn’t these levels create great risk-reward trades again?
These types of trades work just like the pivot points you can see as you move up BTC (in the graphic below). BTC held the critical Fibonacci level of 161.8%, which coincides with the stock’s year-to-date break-even mark (YTD) and the lower range of the YTD Volume Point of Control (VPOC). In fact, BTC rebounded hard, as did vicious bear market rallies on any market. To mark a longer-term bull signal, we would like to see a move above the 21-week moving average and finally a bullish cross with the 8-week moving average. And while it has generated some false signals in the past, for the most part it has been a good gauge of medium to longer-term trends. As an example, shown in the graph below, Bitcoin failed at the exact 8-week and 21-week moving average crossovers and happened last week before falling to the Fibonacci level of 161.8%. And the current trading range should continue to shrink with falling moving averages until we see an upward or downward break in those levels.
In summary, the bulls will continue to want to hold this level and work out a bottom. If this level is broken we could quickly see a move towards USD 20,000 as the cryptocurrency breaks through the YTD, VPOC and YTD break-even areas. Another potential trigger for this type of pullback could be the next pivot level when it occurs near the December 2017 high and anchored volume weighted average price (AVWAP) from the last major low in March 2020 before the major breakout in 2020 Late 2020.
Bernie Schaeffer’s subscribers Chart of the week received this comment on Sunday June 27th.