50 day MA and 50% retracement level tested
As Adam points out, there was news that China will shut down all bitcoin exchanges and that helped to extend the bearish bias for the cryptocurrency.
However, if you look at the charts, the market price action gave a bearish bias before the news.
Looking at the 5 minute chart above, the pair for most of yesterday stay below the 100 hour MA (blue line). Toward the end of the day, the MA started to flatten. The market was entering a consolidation/correcting period.
The price action did move above the 200 bar MA (green line in the chart above) but there were lower highs. The lowest low in the early European session was higher than yesterday's low. Classic consolidation pattern. The buyers had to prove they could take the price higher. They tried. They could not sustain momentum.
Eventually, the two moving averages were broken - along with the lower trend line, and the selling was back on (see chart above). The selling below the lower trend line took the price down from about $3780 (the trend line break) to $3428. or -$352. That is about a 9.3% decline. That is a big move.
Taking a broader view from the daily chart, the price moved down to a key support area defined by the 50 day MA at $3468.68 (I think looking at the 50 day MA is appropriate for this high flyer), and the 50% retracement of the move up from the July low at $3386.82 (see post from yesterday outlining this retracement target). The low for the day at $3428 right between the two key levels. Buyer? I would expect that. Traders can define and limit risk against the area.
What next for bitcoin?
Well, you have to listen to the technicals in this instrument. To not is taking on too much risk. The last 9 days has seen a 30.3% fall in the price. Today the break took 9.3% away.
What I can see, is support at the $3386-$3468 area. It seems wide but you are playing in a volatile currency that is at a high price. A move below that level is more bearish. The $3024 area would be the next major target area.
On the topside, the 38.2%-50% of the move down from the last corrective high (see 5-minute chart), comes in at $3634.51 to $$3698.00. The 100 bar MA on the 5 minute chart (blue line) is moving lower and approaching that area too. That MA will also be key for buyers and sellers. Stay below is more bearish. Move above and the buyers are taking back some control off the key support low.
Another closer level to eye is $3600. Looking at the daily chart, the swing low from August 22 came in at $3599.99 (call it $3600). The high corrective price off the low so far reached $3611 but that was short lived. If the price cannot get above $3600, the sellers are showing more aggression (longs are feeling the pain).
SUMMARY: Overall, good support stalled the fall. I would expect that especially since two technical levels are in the same vicinity. But, if the buyers are to take more control, they need to prove they can get back above the $3600 level and then the 38.2-50% retracement of the last trend leg down. Don't forget the 100 bar MA on the 5-minute chart either. Failure to do that and the sellers remain more in control and the longs remain in fear of a further tumble.