Since having a nice bull run during the month of April, Bitcoin has struggled to keep momentum opening the month of May. After hitting the resistance level at the $10,000 level on the first week of May, Bitcoin price plummeted to the $8,000 resistance level on May 18. During the past few days, we see a decent bounce from the resistance level. As of press time, Bitcoin is trading at the $8,300 level.
Using the Fibonacci Retracement Tool, we can see the bull and bear scenarios depending on Bitcoin’s price action in the next few days.
Looking at the chart with the Fibonacci Retracement Tool, the key levels to look at are the 0.618 Fibonacci level, the $10,000 resistance line, and the $6,400 support line.
The Bullish Scenario
If the price action will push upward with volume confirmation in the coming days, Bitcoin price will most likely re-test the major resistance line at $10,000 level. From March, we can see that we have tested this level four times already, and have failed to break through. If the bounce from the 0.618 Fibonacci level holds strong and pushes upward, we may see a fifth test on the resistance line. A successful break through the resistance line could propel Bitcoin to the next resistance at the $12,000 level. This is the bullish scenario.
The Bearish Scenario
On the other hand, if Bitcoin fails to hold at the 0.618 Fibonacci level, price could go back down to the February lows. We could see a re-test on the $6,400 major support level. This is the bearish scenario.
As long as price action is above the 0.618 Fibonacci level, the bulls are in control of the market. If this holds true, then the downward trend that we currently see during the month of May is merely a corrective move, and we could see further increases in price action in the coming days.
For the next few weeks, it is important to keep a close watch at the Fibonacci levels and daily trade volumes.
Summary of Key Points:
- Bitcoin is currently setting up for its next major move.
- As long as price action is above the 0.618 Fibonacci level, the bulls are in control of the market.
- Upward price action with volume confirmation will re-test the resistance line at $10,000 level.
- A break below the 0.618 Fibonacci level will re-test the $6,400 major support level.
(DISCLAIMER: This is not financial advice. The analysis and recommendations provided here are based on my own research and personal opinion. Trade wisely!)