Bitcoin (BTC) has rallied and once again the rally has failed. The price has faced strong rejection at its trend line resistance which coincides with the 21 Day EMA. This confluence of resistance levels has put Bitcoin (BTC) in a tough spot. Either the price will have to break this resistance now or it will have to retrace and consolidate before it can attempt to break out again. Either way, Bitcoin (BTC) is running out of time to take a decisive direction. The falling wedge in which the price has been trading since the beginning of the bear market does not have much room left. Technically, BTC/USD could fall back to the bottom of the wedge once more before it can retest the trend line resistance, but we have reasons to believe that is not going to happen.
The risks of shorting Bitcoin (BTC) at current levels are astronomically high. Entering a short position now is a lot riskier than entering a long position when Bitcoin (BTC) was trading around $18,000. This is because even the bears know that long term Bitcoin (BTC) is in a bull market and it is supposed to rise towards a new all-time high from current levels be that in months or years from now. If Bitcoin (BTC) had been trading around $6,000 and this had happened, which it did in November, the risks would still be high to enter a short position but so would be the rewards. As we can see, Bitcoin (BTC) fell all the way towards the bottom of the wedge after facing rejection at the 21 Day EMA in November, 2018. The price is once again at a similar point, but the conditions are not the same.
From a risk/reward standpoint, Bitcoin (BTC) does not have enough room for a decline even if it were fall to the bottom of the wedge. The pullback might be sharp but the recovery will be even faster and you may not be able to get out of your short positions in time, or worse might end up getting liquidated. The reason I say that is because the price may be at a similar point but the conditions are drastically different. After the November, 2018 crash, BTC/USD continued to decline all the way towards the bottom of the falling wedge and ultimately found support at a point that coincided with the 200 Week MA.
The 200 Week MA has historically been a strong level of support, not just for Bitcoin (BTC) but in other markets as well. Even Bitcoin (BTC) has never closed below the 200 Week MA in the last four years. That being said, it has dropped slightly below the 200 Week MA on two occasions in the past but then it climbed back above it even faster than it had dropped. So, the point is, Bitcoin (BTC) may retrace back to the 200 Week MA after the recent rejection to establish a double bottom but it is very unlikely to close below the 200 Week MA. This means that Bitcoin (BTC) could drop below the 200 Week MA to touch $3,000 but it is extremely unlikely to close below $3,200 on the weekly time frame.