BTC/USD Forex Signal: Poised for Sharp Breakdown Below $18k

Last technically significant support level at $18,570.

Previous BTC/USD Signal

My previous signal on 14th September produced a small win from the bullish inside bar rejection of the support level I had identified at $18,570.

Today’s BTC/USD Signals

Risk 0.50% per trade.

Trades must be taken prior to 5pm Tokyo time Thursday.

Long Trade Idea

  • Long entry after a bullish price action reversal on the H1 timeframe following the next touch of $18,570.
  • 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 $20,532 or $20,782.
  • 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.

BTC/USD Analysis

I wrote in my previous analysis on 14th September that the price of BTC/USD looked likely to produce choppy action over the short-term, and I was not wrong about that, but I made a mistake in not being more bearish.

The technical picture now and the market in general are very interesting.

We see strong risk-off sentiment gripping markets now, with assets flowing away from risk and into the US Dollar as a safe haven. However, although Bitcoin is certainly weak and clearly is threatening to make a strong breakdown, Bitcoin has really escaped the fate of many other assets typically correlated with risk. This suggests that there are still plenty of buyers for Bitcoin, and that we are approaching a moment of truth.

There is a very key support level at $18,570 – if this breaks down, we could see the price fall very quickly to the $14k area. However, we have seen several stabs down to this area which keep resulting in bullish rebounds as buyers step in. Therefore, bears need to be extremely cautious before entering any shorts. I would want to see the price spend a couple of hours at least below this level, and then make a failed test or near test from below before falling again, before opening a new trade.

If we do get a bullish bounce at $18,570 it could be used to enter a speculative long-term long trade. The high potential risk reward ratio here might justify the trade.

Bitcoin is prone to a dramatic breakdown, but I am not sure it will happen. If it does not, this might indicate hidden resilience in Bitcoin at this price area.

BTC/USD

There is nothing of high importance due today regarding the US Dollar.

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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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