The price action of Bitcoin (CRYPTO: BTC) since its flush from November which lasted three months has been nothing shy of classical price action to an experienced technician. Price action behaved very well with the 9 and 20p SMAs as they were being used as resistance and ABCD patterns played out without hesitation followed by a period of consolidation that led up to the 200p SMA and the 38.2% Fibonacci retracement.
At this juncture we now have one of two scenarios that can play out:
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The 38.2% retracement can act as a longer ABCD pattern for which price can retrace 100-161.8% of the price action from the recent highs in November to the lows made in January.
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Price can fly through the 200p SMA and target the prior highs made in November as strong resistance.
If we take a look at the NASDAQ Composite we find ourselves in a very similar situation where price has reached the 200p SMA resistance and the 61.8% retracement level and is how pulling back.
Comparing the NASDAQ Composite (blue) and BTC/USD (black) from a relative strength perspective, we see that they’ve been moving in lockstep all year.
Overall, as the price action of Bitcoin and Nasdaq continue to exhibit a high degree of correlation, the upcoming earnings season will decide the fate of their directionality. All signs point to a classical ABCD pattern to the downside in both instances, but given how volatile markets have been since November, anything can happen.
