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

Previous BTC/USD Signal

My previous BTC/USD signal on Thursday two weeks ago was not triggered as there was no bullish price action when any of the support levels were first reached.

Today’s BTC/USD Signals

Risk 0.50% per trade.

Trades must be entered prior to 5pm Tokyo time Friday.

Long Trade Ideas

• Long entry after a bullish price action reversal on the H1 timeframe following the next touch of $41,638 or $39,622.
• Put the stop loss $100 below the local swing low.
• Move the stop loss to break even once the trade is $100 in profit by price.
• Remove 50% of the position as profit when the trade is $100 in profit by price and leave the remainder of the position to ride.

Short Trade Ideas

• Short entry after a bearish price action reversal on the H1 timeframe following the next touch of $42,591 or $43,581.
• Put the stop loss $100 above the local swing high.
• Move the stop loss to break even once the trade is $100 in profit by price.
• Remove 50% of the position as profit when the trade is $100 in profit by price and leave the remainder of the position to ride.

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.

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BTC/USD Analysis

I wrote two weeks ago that although we had medium-term bearish momentum, if we saw the price consolidate for at least a few more hours, a breakdown below $42,500 could be an effective short trade entry signal.

This was a good call as the price moved lower and after breaking below $42,500 reached as low as the support level at $39,622.

Over the past two weeks, we have seen a consolidation above $40k, which is taking place simultaneously with a consolidation above $3k in Ethereum, the second largest cryptocurrency by market capitalisation. The consolidation is heavy, the price action slightly bearish. The crypto sector has already lost a lot of value over recent weeks, and now looks prone to a further strong breakdown if Bitcoin can get established below $39,622.

Bitcoin has arrived and is sitting at a pivotal area around $40k. This means it is likely to either provide an entry for a profitable long-term long trade if the level continues to hold, or a short trade if it breaks down.

I will be happy to take a short trade from a bearish reversal off either of the resistance levels identified above, or after two consecutive hourly closes below $39,622. However, if we get a bullish bounce at $39,622, I will also be ready to take a long trade there.

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