BITCOIN Moment of truth after China ban. Which Channel prevails?


Bitcoin is on the back foot again, suffering significant losses following the new round of China bans on crypto trading. Although the market has faced (successfully) this threat before (even recently) and is not something unfamiliar, traders need to consider mostly the psychological effect this may have to weak hands.

Technically though there are two clear patterns on the 1D chart and are giving their own battle to see which one will prevail in the next few days:

1) The Channel Up (blue pattern) that practically started after the July 20 low (which was also a Triple Bottom) and even though its Higher Highs trend-line has been hit twice, its Higher Lows trend-line is about to be touched for the third time. The parameters supporting this Channel is a) The Golden Cross that took place on September 14 b) the 1D MA100 (green trend-line) that appears to be holding today’s sharp drop and c) the 1D CCI hitting its long-term Support Zone.

2) At the same time, since the September 7 Higher High of the Channel Up, the market structure has diverged within it into a Channel Down (red pattern). The parameter supporting this Channel is the 1D MA200 (orange trend-line), under which BTC has closed for 4 straight days and where the price got rejected today.

My conclusion is this. A 1D candle closing above the 1D MA200, breaks the Channel Down upwards and should restore the bullish sentiment and keep the Channel Up valid. In that case the target is the next Resistance (59600), practically the 0.786 Fibonacci retracement (57000). A closing though below the Channel Up, could escalate the selling further towards the bottom of the Channel Down. We have to consider though also the 1W MA50 (red trend-line) which provided support twice in June and July. Even a marginal/ momentary break below it can be bought by long-term investors, we need to see the price considerably lower (e.g. 33000 – 30000) to support a long-term trend switch. So personally if the Channel Up breaks to the downside I wouldn’t be surprised to see an aggressive candle wick below the 1W MA50, which will be bought back quickly.

But what are your thoughts on this? Which Channel will prevail after this new round of China weakness and what will be your target? Feel free to share your work and let me know in the comments section!

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