BTC in a 4-Hour Squeeze Just Above Make-or-Break Support Levels

Updated

Primary Chart: BTC's Key Fibonacci and Measured Move Levels along with Key Demand Zone

BTC continues to trade just above make-or-break levels as it has for much of this week. It continues to chop up and down, similar to the way equity indices have the past few days. Chop essentially entails price action within a range without any directional follow through. Traders tend to get chopped up because the price action starts to move in both up and down, but each time, follow-through does not happen.

The squeeze is a Bollinger Band phenomenon where the bands compress to a narrower range. In other words the standard deviation decreases dramatically, reflecting reduced volatility. Both the 2-hour and 4-hour charts for BTC show that compression typical of a standard-compression squeeze. Because compressed volatility tends to correlate with a subsequent increase in volatility, squeezes help signal when significant directional move may occur. Supplementary Chart A shows the Bollinger Bands squeeze on the 4-hour chart. Supplementary Chart B shows the levels containing this weeks consolidation, where a breakout will signal the start of the directional move implied by the squeeze.

Supplementary Chart A: Bollinger Bands Squeeze on 4-Hour Chart

BTC's Immediate Resistance Levels at $20,503 to $21,403

On the Primary Chart, note the two major resistance levels above price, which are the green and golden lines. These are Fibonacci-based retracements of the entire rally from June 2022 lows to mid-August 2022 highs. The .618 retracement is the closest resistance level that must be reclaimed before price can resume its corrective rally higher. This .618 retracement is at $20,503. Above that, and the target is $21,403, the .50 retracement, which also coincides with the August 20-26, 2022, consolidation period. Note this 21,400 level also aligns with key lows and highs from both June and July 2022—these price resistance levels are shown on the Primary Chart by the two white parallel lines adjacent to the green .50 retracement line.

The .618 retracement level at $20,503 also aligns with the top of this week's consolidation range. See the Supplementary Chart A below, showing the consolidation range from this week by parallel white lines.

BTC's Immediate Support Levels Are Close Below at $19,134, $19,233 and $19,555-19,560

The base of this week's current consolidation (see Supplementary Chart B below) serves as the most immediate support level for BTC. While the upper edge of this range marks the most immediate resistance, which coincides with the .618 retracement (the gold line on the Primary Chart), the lower edge of the consolidation is approximately $19,555 to $19,560 as shown in the supplementary chart below.

Any breakout from this current consolidation range will help dictate the course of BTC's price action the next couple weeks. A decisive break to the upside is a possibility, especially where traders and investors have been leaning quite bearish, a factor that can often provide some support, ironically, to price—because selling can dry up when everyone that is bearish has sold or shorted, and when price doesn't move downward, short covering can begin to put upward pressure on price.

Support also lies at $19,223, which is the .786 retracement of the entire rally from June 2022 lows to August 2022 highs. This level is associated with another Fibonacci level at $19,134, the .618 proportion of the first leg of decline from the August 15, 2022, peak as projected from the start of the second leg of the decline on August 26, 2022.

Supplementary Chart B: BTC's Consolidation Range This Week

BTC's Measured-Move Zone at $16,238 to $17,443

The measured-move area, which also uses some Fibonacci proportions, shows where BTC could in theory fall assuming the decline continues. This area is a zone between $16,238 and $17,443.

This post does not make a prediction about whether the measured-move target will be hit in the near term. Instead, the measured-move levels are identified as merely a possible price path using technical analysis. [

b]But before this measured-move target can become a plausible possibility, a downward breakout from this week's consolidation must occur. Furthermore, the .786 retracement at $19,223 must be violated as well as the teal blue rectangle showing the last three-month demand zone (Primary Chart above) before the measured-move target can be considered.

Author's Comment: Thank you for reviewing this post and considering its charts and analysis. The author welcomes comments, discussion and debate (respectfully presented) in the comment section. Shared charts are especially helpful to support any opposing or alternative view. This article is intended to present an unbiased, technical view of the security or tradable risk asset discussed.

DISCLAIMER: This post contains commentary published solely for educational and informational purposes. This post's content (and any content available through links in this post) and its views do not constitute financial advice or an investment recommendation, and they do not account for readers' personal financial circumstances, or their investing or trading objectives, time frame, and risk tolerance. Readers should perform their own due diligence, and consult a qualified financial adviser or other investment / financial professional before entering any trade, investment or other transaction.

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Note

Price continues to hold closely to the minor down trendline that has been in effect since mid-August 2022. Some technicians say that the longer price spends at a trendline (down or up), the more likely the line will break. If the trendline breaks to the upside, the upper consolidation level and Fib levels discussed in this post must also break for an further upward price movement to succeed.

This is short-term analysis. The longer-term picture for BTC remains bearish.

Note

BTC has now broken out of its consolidation between 19,555 and 20,576. The breakout was to the downside—no surprise given the current interest-rate environment and macro backdrop as well as the longer-term downtrend since its all-time high, and no surprise given that BTC's rival ETH looking more energy efficient ahead of its Merge event.

Other key levels identified as support have also been broken including 19,223 (.786 retracement) and 19,134 (the .618 extension / projection of the first leg of decline from the 8/15 peak).

The Bollinger Bands are now expanding as volatility now expands. The original post identified the compression in volatility which likely signaled the next larger directional move -- and the post noted that the breakout from the consolidation range would indicate the near term direction. The breakout was down, so unless price whipsaws quickly, the near-term path of least resistance should continue to be downward.

Note

4-hour chart showing compression in volatility turning to expansion in volatility with directional move downward outside the consolidation range. Also note that price stalling at the downtrend line it had previously broken to the upside. Will this line also break?

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