Bitcoin price may be nearing exhaustion after recording its sixth consecutive weekly green candle.
Bitcoin price has been showing significant strength as Bitcoin (BTC) rallied by more than 60% in a matter of six weeks, surging from $10,000 to $16,500 and leaving many investors behind.
These investors were waiting for the close of the CME gap at $9,600, which didn’t occur. However, can the markets expect a correction to happen, or is further strength likely for the markets?
Bitcoin posts sixth consecutive green weekly candle
The daily chart shows some crucial levels to watch. If Bitcoin’s price wants to continue its upward momentum, the previous resistance zone has to flip for support.
A similar example is shown through the previous breakout at $13,200. This area acted as resistance before the breakout but immediately flipped to become new support. This support/resistance flip warranted further continuation to $16,500.
The $15,500–$15,700 area implies the same critical construction as the previous $13,200 area. Holding the $15,500–$15,700 area means further upward continuation is likely, while a breakdown confirms the bearish divergence that should push the price down. This downward move may even see BTC drop to the $14,000 level.
A correction to $12,000 is still on the table
The weekly time frame shows a precise resistance level at $12,000, which was broken six weeks ago. The next massive resistance zone is found between $15,750 and $16,500, which was hit last week.
However, is a continuation likely after such a massive surge? One argument is that there are still many untested levels beneath the current spot price where liquidity can be found.
Moreover, the sentiment has flipped from bearish to euphorically bullish as more institutions jump on the Bitcoin bandwagon, so a pullback shouldn’t come as a surprise.
As the chart shows, a correction toward $12,000 could still occur, which used to be a critical level. This level broke after holding for two years. However, a retest of this zone didn’t occur.
Investors and traders should watch this level as a potential entry of interest.
Fear & Greed Index says the market is overheated
The Crypto Fear & Greed Index measures different variables to gauge current market sentiment, which is still 90 out of 100. This level is qualified as “extreme greed.”
This level was only reached once before. This previous one marked the top of the bull run in June 2019.
Of course, it’s not an entirely reliable indicator, and traders and investors shouldn’t blindly anticipate their strategy based on this one metric. Nevertheless, it gives useful insight into the current state of euphoria in the market.
Given that FOMO — fear of missing out — is setting in, a correction would put everyone back on their feet again. As previously stated, such a pullback would actually be very healthy for an overheated market.
Levels to watch on lower time frames
The four-hour chart shows a clear uptrend since the breakout at $10,000. However, there are some crucial levels to hold to sustain this momentum.
The red box identifies the liquidity above the recent high. To keep climbing higher, an apparent breakthrough in this resistance zone has to occur in which the $16,500 area immediately flips for support. Otherwise, the breakout will most likely become a fakeout and just a tap for liquidity before the market reverses.
As previously discussed, the $15,600–$15,750 area has to hold for more upside, with the next significant area of resistance at around $17,500. If that area fails to hold as support, the next support zone is found at $14,800 to $15,000. A potential bearish support/resistance flip of the $15,600–$15,800 area will likely trigger more downside.
If this happens, the next areas of support will then likely be $13,700 to $13,900 and $12,800 to $13,200.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.