Bitcoin (BTC) is due for a swift recovery towards $6,000 as long as it closes the current weekly candle above trend line support. RSI for BTC/USD points to a similar outcome on the weekly chart. Bitcoin (BTC) recently broke market structure which led to a crippling correction the likes of which we have not seen in the past. This correction or crash has now become a part of Bitcoin (BTC)’s outlook for years to come. The moment it broke below the $5,800 level, Bitcoin (BTC) completely shattered any hopes of a bullish comeback towards the end of the year. Some analysts like Tom Lee are still confident that Bitcoin (BTC) may rise to $15,000 by year end, but that is extremely unlikely under current circumstances. That being said, BTC/USD is long overdue for a short term recovery.
The price is expected to rally from current levels. Soon as Bitcoin (BTC) closes the current candle above $3,210, we are likely to see a green candle that is going to take the price above $4,000. The next one or two candles that follow will be expected to see Bitcoin (BTC) retesting previous market support at $6,000 which has now become a critical resistance. Too many people are expecting a pullback to $3,000 which is exactly why it is not going to happen. The price is likely to stage a reversal next week from current levels but that is not going to happen without some good old stop hunting that is going to teach complacent bears some important lessons. This short squeeze that we have been mentioning in our previous analyses is also long overdue just like a reversal at this point.
The bear market is about to come to its end, but the bears are still too confident about a strong pullback. Some are calling for a pullback to $2,800 whereas others are expecting a fall below $1,000. Most of these calls are based on sentiment instead of facts or evidence. This kind of attitude never helps especially at turning points in a market. As we can see on the weekly chart for BTCUSDShorts, the number of shorts has just reached an all time high this week. In other words, Bitcoin (BTC) has not seen such a large number of bears in its entire history. Now, the complacent trader who has been far too comfortable seeing the price continuously drop is going to take this as a sign of strength for the bears whereas the cautious trader is going to take this as a contrarian signal for a reversal.
If we go back to December last year, we can see that the number of shorts declined just before a massive rally as one should expect. However, if you look at the candles near the bottom, they have some really long wicks which signify both confusion and manipulation. The first green candle is 2018 conveys a very important message. If you look at the candle, it is the longest candle in the history of BTCUSDShorts. However, it is also the candle that made a new all time low for BTCUSDShorts. This goes on to show how the whales throw retail traders false signals before a reversal. If we apply that knowledge to the current candle that has formed an all time high for BTCUSDShorts, then it would be very reasonable to expect that the current candle is going to do the exact opposite, hunting some bears in the near future.