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What could see BTC move down?

Bollinger Bands (BB)

The Bollinger Bands are showing serious contraction, with a BB squeeze currently taking place. Although the BB are currently providing no signals, there is a bearish BB scenario.

BTC/USD BB support line

In the chart above, we can see that there is a huge BB squeeze, with the width of the BBs at its smallest since January. The dashed red line is the BB support level; if there is a clear break below this, we should expect a huge move to the downside ($10000 USD is upside resistance). A break below this red line would see BTC move into the lower regions of the BBs, potentially into the open chart space away from the lower BB SMA line. This would result in a new downwards trend.

Trend line

In the example shown below, we can see that this trend line with numerous validation points, spanning over multiple months has been broken.

BTC/USD broken trend line

 

In the bearish scenario, we could see BTC start a new downwards trend providing that $10000 USD is not broken. The bearish scenario may see BTC touch the trend line again, which would be near the $10000 USD region. A clear break above $10000 USD would be needed in order to invalidate this trend line.

Traditional markets

Ever since the COVID-19 crisis took hold of the markets, the correlation between BTC and the S&P 500 have increased to over 0.5 correlation; meaning that the traditional markets and the crypto market (largely influenced by BTC) are correlated. Before the traditional markets closed on Friday, the DJI and S&P 500 saw major losses.

DJI (Dow Jones Industrial) Heikin Ashi chart, major losses.

The losses seen at the end of last week were partially due to fears of a second COVID-19 wave. These fears stemmed from the recent mass gatherings in the USA. If the stock markets were to crash again, as seen in March, all of the previous gains will be wiped out and BTC will be sent down with the traditional markets. If this second crash occurs, investors will pull all of their recoveries or gains of the last couple of months straight into cash.

BTC/USD & SPX/USD correlation.

Many traders do not trade with fundamentals, only with TA, although it is important to note the impact traditional markets are currently having on BTC when they make major moves and the impact they could potentially have on the bearish scenario. In the bullish scenario this would simply be a market blip and will see the stock market continue to recover to pre-COVID-19 levels.

Price targets

$8600 USD

The first price target is $8600 USD, this would see BTC break below the ascending triangle in the bearish scenario. $8600 USD is the first level of resistance. In the BTC bearish scenario, this would definitely be hit, possibly broken. A move down to $8600 USD would result in an 8% loss from current prices.

$7700 USD

In the bearish scenario, $7700 USD would definitely be possible as the next BTC move will be a huge one, this is due to the BB suppression; however, breaking below $7700 USD would be unlikely and would need total bear control to push BTC lower than $7700 USD before the next report. A move down to $7700 USD would result in a 17.5% loss from current prices.

$6700 USD

$6700 USD would be the next target after $7700 USD in the bearish scenario. On BTC’s way down to $6700 USD there may also be resistance at $7400 USD. A move down to $6700 USD would result in a 29% loss from current prices, although a price shift to $6700 USD would be unlikely.

*if BTC breaks $10000 USD in a significant way, the bearish scenario is invalid

BTC/USD bearish scenario, price losses

 

AAB price review

AAB has had a very poor period since the last report was written, losing significant value; currently sitting at ATLs coming in at $0.48 per coin. AAB has decreased 63% in value since the last report, as shown in the chart below:

AAB/USD chart

 

When descending wedges form they typically break out in the same direction as the trend before it. In the case of AAB, the price did not (as shown below), this proves why it is important to wait for a confirmation breakout before buying.

Although, is this meltdown of the AAB price a time for more selling or a buying opportunity?

Potential reversal

Trend Line

One indication for a reversal can be seen with the recent break of the downwards trend line, as shown below:

Broken downwards trend line AAB/USD

 

The breaking of this trend could be the start of a reversal back up, recovering some of the major losses seen over the past week. This would therefore present a good buying opportunity.

MACD

AAB has recently seen a lower positive crossover, a very bullish signal.

AAB MACD crossover

The last time a significant MACD crossover occurred with AAB was during late April until early May. This saw the AAB price increase significantly. This crossover shows signs that a trend reversal could occur.

Previous AAB/USD MACD crossover

Potential consolidation

The Bollinger Bands (BBs) are showing that a potential price consolidation may be set to occur, suggesting that AAB may have found its bottom, or be waiting to continue its move lower.

BBs decreasing in width

 

The BBs are currently contracting; this suggests that the price will be somewhat stagnant for a period of time. AAB is showing similar characteristics to the first move down. If the consolidation occurs, then the price action after the consolidation will depend on the direction of the breakout.

Continuation of current trend

The Keltner Channels (KC) are showing, that until tested, a continuation of the current trend seems to be most likely.

AAB/USD KCs

 

As we can see from the chart above, AAB has not even tested the KCs since the downturn began. Although with the potential consolidation, and the break of trend mentioned previously, could see the rate of decrease begin to slow, potentially seeing a reversal in price over the coming weeks.

Price targets

$0.33 USD

$0.33 USD is the next resistance level determined by the pivot points (S1). We are currently below the central pivot suggesting that $0.33 could be the area where we see potential consolidation – maybe a reversal in trend from the current downwards movement. A move down to $0.33 USD would result in a 30% loss from current prices

$0.75 USD

If the current prices are the bottom for AAB, with a reversal in store for us, then $0.75 USD is the first target. $0.75 USD is the 0.236 Fibonacci retracement level. An increase to $0.75 USD from our current position would see AAB increase 61%.

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This external intelligence report was written by Oliver Page, and commissioned by AAX, for marketing and educational purposes only. The views, analyses and projections are based on the author’s independent research. The report should not be taken as a form of investment advice.

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