Bull Gone: Bitcoin Price Forming Doji to Signal Potential Trend Reversal
Bitcoin price on Tuesday reached a session high on Coinbase at $3,586 but remained in the fears of a potential reversal action overall.
Ahead of the US session so far, bitcoin’s opening and closing positions today have remained very close to one another, as indicated by the small candlestick. Called a Doji candlestick formation, this signals a potential trend reversal. We saw a similar creation recently on December 15 during the downtrend action. The price corrected exceptionally well to the upside after that, recovering as much as 14% of the previous losses.
And now, we are looking at the Doji again. It could mean that bitcoin will either undergo a sideways consolidation or potentially end up finishing the rally altogether.
The Doji tells us that bulls aren’t out of their shells yet.
Bitcoin/Dollar Technical Indicators
The Bitcoin/Dollar rate appears to be inside a tight bear flag formation, akin to the price action between 18 and 29 November. The pair is only beginning to break out of the structure, albeit sideways, again pointing to extended bearish sentiment. Even if we see it moving above the critical resistance area of 3586-3647 USD/EUR, it cannot guarantee a sustained upside momentum.
On a 4H chart, the Relative Strength Index is also rejecting further upside gains and is correcting from its overbought area. The bias is utterly bearish, as of now.
Nevertheless, the intraday price action could bring adequate opportunities to take out small but decent profits. Let’s have a look.
Bitcoin/Dollar Intraday Analysis
We are first looking at our parameter of the day, defined by dotted horizontal lines in red and green. While 3586-fiat is acting as our interim resistance, 3446-fiat is providing an equally credible interim support.
We will first begin with our intrarange action. It means entering a long position towards resistance on a bounce back from support and a short position towards support on a pullback from resistance. The circa $130-gap between the levels would thus give us plenty of opportunities to make profits, providing we also maintain a stop-loss order just 1-pip opposite the direction of the price action.
In case either of these levels fails to hold Bitcoin/Dollar, we will switch to our breakout/breakdown strategy. In case the pair pierces through 3446-fiat, we will open a short towards 3323-fiat, our primary downside target of the session. A stop-loss at 3436-fiat will meanwhile protect us from additional losses should the price bounce back.
In case the pair jumps above 3586-fiat, we will open a long position towards 3647-fiat while maintaining a stop-loss order at 3576-fiat to maintain our risk management strategy.
Featured image from Shutterstock.
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