Bitcoin – In A Potential Flush Zone

The price action of Bitcoin BTC/USD since its flush from November which lasted three months has been nothing shy of classical price action to an experienced technician. Price action behaved very well with the 9 and 20p SMAs as they were being used as resistance and ABCD patterns played out without hesitation followed by a period of consolidation that led up to the 200p SMA and the 38.2% Fibonacci retracement. 

At this juncture we now have one of two scenarios that can play out:

1. The 38.2% retracement can act as a longer ABCD pattern for which price can retrace 100-161.8% of the price action from the recent highs in November to the lows made in January. 

2. Price can fly through the 200p SMA and target the prior highs made in November as strong resistance. 

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If we take a look at the NASDAQ Composite we find ourselves in a very similar situation where price has reached the 200p SMA resistance and the 61.8% retracement level and is how pulling back. 

Comparing the NASDAQ Composite (blue) and BTC/USD (black) from a relative strength perspective, we see that they’ve been moving in lockstep all year. 

Overall, as the price action of Bitcoin and Nasdaq continue to exhibit a high degree of correlation, the upcoming earnings season will decide the fate of their directionality. All signs point to a classical ABCD pattern to the downside in both instances, but given how volatile markets have been since November, anything can happen.