BTC/USD Forex Signal: Significant Bearish Breakdown Below $40k

Adam Lemon

The Bitcoin price is bearish below $36,656.

Previous BTC/USD Signal

Last Thursday’s signal was not triggered as unfortunately the price did not reach the resistance level, I had identified at $43,581 when it made the high of the day.

Today’s BTC/USD Signals

Risk 0.50% per trade.

Trades may only be taken before 5pm Tokyo time Tuesday.

Long Trade Ideas

  • Go long after a bullish price action reversal on the H1 timeframe following the next touch of $32,817, $31,630, $31,015, or $30,000.
  • Place the stop loss $100 below the local swing low.
  • Adjust the stop loss to break even once the trade is $100 in profit by price.
  • Take off 50% of the position as profit when the trade is $100 in profit by price and leave the remainder of the position to run.

Short Trade Ideas

  • Go short after a bearish price action reversal on the H1 timeframe following the next touch of $36,656, $37,638, or $39,622.
  • Place the stop loss $100 above the local swing high.
  • Adjust the stop loss to break even once the trade is $100 in profit by price.
  • Take off 50% of the position as profit when the trade is $100 in profit by price and leave the remainder of the position to run.

The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.

BTC/USD Analysis

I wrote last Thursday that we were seeing a heavy consolidation above $40k, which looked likely to result in a further strong breakdown if Bitcoin could get established below $39,622.

This was a great call as the consolidation did finally break below that crucial support level at $39,622 confluent with the big round number at $40k. After we got that breakdown a few days ago, the price then consolidated at the next area of support at $38k before breaking down again in an orderly way.

Bitcoin has now been falling steadily since November 2021 and has lost half its value in that time. The entire cryptocurrency sector is in trouble. Now the price is breaking strongly below key support levels, there is no reason not to be bearish, and it is reasonable to expect further falls.

The price has room to fall further if the nearest resistance level at $36,656 continues to hold. The support levels between $30k and $32,817 are very significant as the represent the lows of July 2021. This area of support may well hold, but if it does break down, the price will be likely to fall further to $20k.

There are likely to be good opportunities to trade Bitcoin short now. It would be foolish to buy. If we get a bearish reversal following a retracement to $36,656 that will provide an excellent opportunity to enter a new short trade.

If the price can get established above $36,656 today, which is not likely, that will be a sign of less bearishness.

BTC/USD

There is nothing of high importance due regarding the USD today.

Adam Lemon

Adam Lemon began his role at DailyForex in 2013 when he was brought in as an in-house Chief Analyst. Adam trades Forex, stocks and other instruments in his own account. Adam believes that it is very possible for retail traders/investors to secure a positive return over time provided they limit their risks, follow trends, and persevere through short-term losing streaks – provided only reputable brokerages are used. He has previously worked within financial markets over a 12-year period, including 6 years with Merrill Lynch.
Learn more from Adam in his free lessons at FX Academy

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