Trading Bitcoin: Small Correction After Yesterday’s Rally

Small Correction After Yesterday’s Rally

Today, Bitcoin is down -1.64% after a bounce to $10.8k yesterday. Currently, Bitcoin’s sequential indicator is on a green 3 of 9 candle on the daily chart above. Yesterday, sequential activated a long trade after a green 2 candle closed above the previous green 1 candle. Depending on your risk tolerance, it would be reasonable to set a stop loss at $10.3k. While the sequential indicator may be bullish on a daily timeframe, Bitcoin still faces heavy resistance with the downward sloping trend line as well as the sequential setup trend line at $12k. Until Bitcoin can create a higher high above $12.3k, the structure of the trend will remain neutral-bearish.

4 Hour

After yesterday’s price increase, 4 hour sequential has now flipped to a red 1 and is in neutral territory. However, the moving averages have formed a death cross which is typically indicative of a bearish reversal. Additionally, the Lucid Parabolic SAR (blue x’s) have recently flipped into a bearish posture and are serving as resistance at $10.9k.

Litecoin’s Point of No Return

Litecoin has now broken below all three moving averages on the daily chart above. Additionally, the moving averages will soon form a death cross which is indicative of downward price action. If Litecoin forms a red 2 below our current red 1 candle, it will initiate a short trade according to sequential theory. From a fundamental perspective, Litecoin’s mining profitability is becoming severely low as block rewards are cut in Litecoin’s next halvening.

As you can see from the chart above, Litecoin’s hashrate has decreased severely since the summer of 2019. As Litecoin’s hashrate decreases, its network becomes more vulnerable to 51% attacks and other external threats.

Conclusion

Bitcoin has bounced from the 0.382 fibonacci line at $9.5k and is making its way toward a retest of $11k. However, Bitcoin will not be bullish on a macro timeframe until the bulls can create a higher high above $12.3k. Current support stands at $10.3k while the strongest resistance remains at $11.7k.