Summary

  • Thursday’s risk-off break set the move in motion. The weekend rally stalled at $76,052, and buyers are now leaning ahead of the 200-day moving average at $73,153.

Bitcoin is doing its ABCs technically. The A leg was Thursday’s sharp break lower, the B leg was the corrective bounce over the weekend, and the C leg took the price through Friday’s floor and toward the 200-day moving average. Buyers have stepped in ahead of that moving average twice. The next test is whether they can get the price back above the old floor.

In the video above, I walk through each leg of the move and look at what buyers need to do to take back some control, where sellers can lean against the bounce, and what comes into play if the 200-day moving average gives way.

A. The risk-off move breaks the hourly moving averages.

On Thursday, Bitcoin came under pressure as risk-off flows picked up in the aftermath of the US election. The price fell below both the 100- and 200-hour moving averages with momentum and stayed below them. That was the first technical clue that sellers had taken control.

The swing-area floor near $74,925 held on Friday. Buyers had a level to lean against, and the hold gave them room to push the price back up over the weekend. The next question was what would happen when that bounce ran into resistance.

B. The weekend correction stalls at the broken 38.2% retracement.

The bounce carried Bitcoin back toward the broken 38.2% retracement at $76,052. Sellers leaned against it, and the price rotated back to the downside. That gave traders a level to define risk on the topside and put Friday’s floor back in focus.

This time, the floor near $74,925 gave way. With buyers losing the level they had defended on Friday, the price stretched toward the next major target, the 200-day moving average.

C. Buyers lean ahead of the 200-day moving average.

The low reached $73,460, about $310 above the 200-day MA at $73,153. Today, the price came within about $500 of the moving average before bouncing again. Buyers are stepping in ahead of it, and the moving average is now the downside barometer for both sides.

On the topside, the old floor near $74,925 is close resistance. Getting back above it and holding would give buyers some added confidence and put the $76,052 retracement back in play. If sellers can keep a lid on the bounce near the old floor, they keep the near-term advantage. A break below the 200-day MA would give them more control and bring the 50% retracement at $72,554 into focus.

Education. How to use an ABC move to define risk.

In this example, the A leg established the downside bias when Bitcoin broke the hourly moving averages. The B leg showed where sellers were willing to step back in. The C leg then took out the prior low and brought the next support target into view. Each leg gave traders a level they could use to judge whether the price action was following through.

The next clue comes from how price behaves at the old floor. If Bitcoin gets above $74,925 and buyers defend it on a retest, they have a closer level to lean against and a reason to look toward $76,052. If the bounce stalls at the old floor, sellers have a nearby level to define their risk and the 200-day MA remains the target below. That’s how the same chart can give both sides a roadmap.

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