After all, this week we saw the chance of changing the passive market into an active one. For more than a month, the price has been moving in a narrow range that resembles a wedge. At the same time, the volumes declined continually. In the previous weekly analysis, we expected a continuation of the movement in the wedge with the ultimate target of $3230-$3330. However, the sellers did not have enough power to continue the fall and after that sellers could not keep below the previous local low, buyers took the initiative in their hands:
A similar situation took place on December 14, when everyone was expecting a continuation of the fall to $3,000. At this point, buyers intercepted the initiative and organized a short-term trend with a local high of $4370.
On the chart, we see two wedges. Though, the angle of sellers’ attack in these wedges is completely different. In the first case, it was an aggressive fall in large volumes. The current wedge looks more like a correction, after the growth from 17 December. The volumes are noticeably smaller. Therefore, buyers are well-placed to continue growth with the ultimate target of $5150-$5200.
The breakthrough of the wedge up is a good event for buyers but the price is still in the falling channel:
Therefore, a good confirmation of the intentions of buyers should be the breakthrough of the price zone of $3800-$3870 at large volumes. It will break the falling trend from December 24 and will give confidence to all market participants that in the near future the price will increase.
In addition to the trend line, the range of $3850-$3950 clearly shows a large liquidity, which buyers will not easily break without volumes:
If we analyze the mood of market participants, then buyers are beginning to believe in the continuation of the growth. This is confirmed by a fear/greed index which is 42:
Margin positions of buyers are now at the top of the trend line. If the buyers do not begin to continue their attack after the consolidation, sellers will begin their game and buyers will be actively closing their positions. Moreover, now the marginal positions of buyers are at highs.
Sellers look puzzled. This is what the situation says about their marginal positions:
Sellers do not have a common mood for the future sequence of events.
This situation confirms our opinion about the critical point of $3870. As long as buyers are not fixed above this price, we can only hope for a continuation of growth, rather than claiming.
The lower critical point for buyers is $3,500. If buyers decided to change the situation on the market drastically, they should keep that price.
According to the wave analysis, the correction wave Y ended on 7 February. Globally, the correction lasted from 24 December and corrected the previous growth by slightly more than 78.6%:
If buyers can breakthrough $3860, then the next target will be $4580 and the potential final target will be $5200:
No matter how we analyse it, we see that without a breakthrough of $3860, buyers will not be able to continue to grow confidently. This is a kind of test on strength and desire. Therefore, we expect how buyers will cope with this test and we will present the course of the week and work out our weekly scenario. See you at the next analysis!
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About the Author: Peter Oleshchuk is a trader and technical analyst. He has spent two years studying and analyzing the crypto market.