Bitcoin (BTC) has now reached critical levels where it is expected to make decisive movements. The price is struggling to get past the resistance line on the BTC/USD weekly chart above. A break above this downtrend resistance will restore confidence in the market for the time being and Bitcoin (BTC) can be expected to continue a rally towards $10,000. However, a rejection at these levels will raise a big red flag as Bitcoin (BTC) will be expected to retest the support at $5,800.
So far, Bitcoin (BTC) has only tested this support two times. The first time it tested the $5,800 support was in November 2017 before the price reached an ATH. The second time it tested the $5,800 support was in June 2018. It is pertinent to note that the support was tested twice in June. It could be seen as a double bottom but it could also be seen as touching the support two times. This means that if Bitcoin (BTC) faces a rejection at this point and continues to fall lower, it will raise a major red flag for professional investors. The more frequently a support is being tested, the higher the chances of it being broken. The same is also true for the downtrend resistance. Bitcoin (BTC) has now tested the recent downtrend resistance (since March) three times which means there is a high chance of it being broken.
However, to professional investors it is not about wishing or hoping Bitcoin (BTC) goes to a certain high or falls to a certain low. It is about probabilities and risk management. So, if Bitcoin (BTC) were to fall down to $6,000, most professional investors would exit their trades in order to cut their losses because now there would be a high probability that Bitcoin (BTC) will break the support at $5,800 and fall even lower to settle between $5,000 and $3,000. On the other hand, if the price breaks the downtrend resistance and continues towards $10,000, the move will be a quick one as buyers would readily jump in and it may be a bit too late for some to buy.
While the long term weekly chart for Bitcoin (BTC) looks favorable for a run up in the next few weeks, the daily chart for BTC/USD above shows that Bitcoin (BTC) has just fallen out of a rising wedge and that technical indicators support a short term correction. RSI is likely to cool off and MACD seems poised for a correction after an aggressive rally since July 15. EMA alignment for BTC/USD appears bearish but things could change quickly in the days ahead as the price corrects. EMA levels of 200, 100, and 50 will be considered as near term support as BTC/USD retraces. If the price falls and closes below the 50 EMA, it will be a strong sign of bearish continuation and in that case the price of Bitcoin (BTC) can be expected to fall further and settle between $3,000 and $5,000.