The Bitcoin market initially rallied on Monday but gave back a lot of the gains to form an inverted hammer, which is a potentially negative sign. However, we are sitting on the 50-day EMA, so that in and of itself would probably offer a little bit of support. The 50-day EMA is an indicator that will attract a certain amount of attention, and the fact that we bounced just a bit shows signs of life.
If we break down below the bottom of the candlestick, then it is possible that the Bitcoin market will go looking towards the $40,000 level. The $40,000 level is a large, round, psychologically significant figure, and an area that has previously been resistance, and an area that the 200-day EMA is reaching towards. With this being the case, I believe that the market will find this as an area that is very important, so breaking down below it could open up significant selling. At that juncture, the market would go looking towards the $35,000 level, and then possibly the $30,000 level.
On the other hand, if we were to break above the top of the inverted hammer, it opens up the possibility of a move towards the $50,000 level. The $50,000 level is a large, round, psychologically significant figure that will attract a lot of attention. The market would see a lot of pressure in that area due to the fact that we had that massive red candlestick, and as a general rule, this type of candlestick that we had formed from that area rarely happens in a vacuum, so a little bit of follow-through does make a bit of sense. It has been very choppy over the last several sessions, so now the question is whether or not we will go to that support level underneath.
If we do somehow wipe out the top of the long, red, nasty candlestick from last week, then it is likely that the Bitcoin market will go looking towards the $55,000 level. Above there you have the market going towards the $60,000 level which was basically where the all-time highs were. Regardless, in order to start buying, you need to see either impulsive move to the upside or some type of supportive candlestick.
