Thus far, 2020 seems to have brought back volatility into the cryptocurrency market. On Jan. 2, the entire market capitalization dropped nearly 4 percent, but the next day $14 billion were injected into the market. Now, it seems like Bitcoin, Ethereum, and XRP could be preparing for a significant price move.
On Jan. 3, Bitcoin went from trading at a low of $6,900 to a high of $7,440. The sudden 7.75 percent price jump created a bullish engulfing candlestick on BTC’s 1-day chart. This technical pattern is considered a bullish formation that is likely to reverse the bearish trend seen over the last few months.
It is worth noting that the fact that this bullish engulfing candlestick is overlapping the preceding four candlesticks makes it more effective. But, the bullish outlook will be confirmed once the succeeding candlestick closes above the engulfing one.
The TD sequential indicator seems to have predicted the unexpected upswing that took Bitcoin to $7,440. On Jan. 2, as Bitcoin plunged to $6,960, this technical index presented a buy signal in the form of a sequential 13. Like the bullish engulfing candle, this bullish signal will be validated the moment the current green two candlestick starts trading above the preceding green one.
Despite the bullish perspective, Bitcoin remains contained within the Bollinger bands, which have been squeezing since Dec. 10. Squeezes are typically followed by periods of high volatility. The longer the squeeze, the higher the probability of a strong breakout.
Thus far, BTC is trading within the lower and upper Bollinger band for the past 25 days. This trading range is a reasonable no-trade zone due to the high risk that it poses to trade within it. The area sits between $6,850 and $7,580.
A break below the $6,850 support level could send BTC down for a deeper correction. Based on the Fibonacci retracement indicator, such a bearish impulse could take the…