Key Takeaways
- Bitcoin fell to its lowest level in seven weeks on Tuesday, giving back the gains posted at the end of last week after Fed Chair Powell opened the door to a cut in interest rates.
- After hitting its new all-time high on Aug. 14, the cryptocurrency has reversed course, potentially laying the groundwork for a bull trap—a trading event where prices rise, before reversing sharply, leaving investors with an unexpected loss.
- Investors should watch key support levels on Bitcoin’s chart around $107,000 and $100,00, while also monitoring resistance areas near $117,000 and $123,000.
Bitcoin (BTCUSD) fell to its lowest level in seven weeks on Tuesday, giving back the gains posted at the end of last week after Fed Chair Powell opened the door to a cut in interest rates.
The legacy cryptocurrency has come under pressure recently as some large investors have reportedly liquidated positions and bitcoin ETF outflows have increased. Bitcoin has fallen about 12% since hitting a record high of above $124,000 on August 14. The digital currency fell as low as $108,700 this morning, its lowest level since July 9.
Below, we take a closer look at Bitcoin’s chart and use technical analysis to identify price levels that investors will likely be watching out for.
Potential Bull Trap Emerges
Since hitting its all-time high less than two weeks ago, bitcoin has reversed course, potentially laying the groundwork for a bull trap—a trading event in which prices rise before reversing sharply, leaving investors with an unexpected loss.
It’s also worth noting that as the pioneer cryptocurrency made a new high, the relative strength index made a comparatively shallower high to create a bearish divergence between the price and indicator, signaling waning buying interest.
Let’s identify two key support levels on bitcoin’s chart to watch if the price continues to decline and also point out resistance areas worth monitoring during possible recovery efforts.
Key Support Levels to Watch
The first lower level to watch sits around $107,000. Investors could seek to accumulate BTC near the prominent December and January peaks, an area on the chart that may flip from prior resistance to future support.
Selling below this level could see a retracement toward the closely watched $100,000 area, currently just below the upward sloping 200-day moving average (MA). This location would likely attract buying interest near a horizontal line that connects a range of corresponding trading activity on the chart between November and June.
Resistance Areas Worth Monitoring
During recovery efforts, investors should keep track of the $117,000 area. The cryptocurrency could encounter selling pressure in this location near last week’s failed retest of the 50-day MA and a sideways trend that formed on the chart in the second half of July.
Finally, a bullish reversal back to the upside may spark a rally toward $123,000. Investors who have bought BTC during the current pullback could seek exit points near this month’s closing high, which also closely aligns with last month’s high.
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As of the date this article was written, the author does not own any of the above securities.