Bitcoin surged past $7,900 in the past 24 hours, gaining over 7% in the process. While many traders and enthusiasts are excited about this surge, chart formations around this price region is leaving some others even more confused.
Cryptocurrency trading or any other kind of electronic trading involves constant analysis. News developments and events surrounding the affected industry play a huge role in predicting the next market direction. However, the majority of those involved in trading exercises study the market using price charts.
The Key Elements of Trading Analysis
Trading analysis revolves around two major factors – support and resistance. These are the factors that provide information about the market direction, based on the history of price. They are used to draw trendlines and also determine key points on the price charts of any given trading element.
At any given support or resistance level, the price is expected to either reverse its direction, or continue in its original direction with momentum if it breaks through. Therefore, whenever the price approaches or settles around such a region, traders become more alert.
The $7,900 region for Bitcoin represents one of such strong regions. As a matter of fact, since this region has been respected numerous times by BTC price, a lot is expected from what happens from here. Some popular figures in BTC price analysis are already making their opinions known about what to expect from here. Here are some tweets from some of the renowned crypto trading analysts around:
The major downtrend channel resistance test.
Technically, a nice short opportunity with a tight stop loss.
Still, a scam-wick to 8000$+ is very likely to occur. $BTC $BTCUSD #bitcoin pic.twitter.com/jHHo36Zhi5— CryptoHamster (@CryptoHamsterIO) January 7, 2020
Lets clear 7860 – 8090 resistance Don, and 9k's is on target. pic.twitter.com/s4zfgN845L
— Wolf šŗ (@IamCryptoWolf) January 6, 2020
Lets clear 7860 – 8090 resistance Don, and 9k's is on target. pic.twitter.com/s4zfgN845L
— Wolf šŗ (@IamCryptoWolf) January 6, 2020
The posts above suggest that there will likely be a pullback from the recent surge in BTC price. This is informed by the fact that in the last couple of months, price has bounced off the upper trendline of the downward channel. This is coupled with the fact that even for a longer period, the sideways channel of BTC price is bordered by an upper resistance line that coincides with the current BTC price.
How to Respond to the Bitcoin Market
Usually, in order to break through such levels, some significant event is expected, of which the industry isnāt pointing to any at the moment. However, this does not completely negate the possibility of BTC price charging through this region to the upside. After all, there are huge expectations for Bitcoin in 2020 and it is not too early for that to kick in.
Traders who are active in the cryptocurrency market are expected to pay closer attention. It is common to hear analysts talking about using tight stop-losses in times like this. For amateurs, the simple advice is to step aside and wait until the market finds a clear direction. Otherwise, it could be a perfect situation to mess up oneās trading portfolio and lose money.
Cryptocurrency trading is becoming more and more embraced as a profitable opportunity. Many young people see it as an independent opportunity to create wealth and create a future for themselves. However, little mistakes such as wrong judgement of market behaviour could be very costly for market participants. Therefore, it is advisable to be more cautious and only trade the markets when the price direction is clear. In moments of uncertainty like the market is currently presenting, perhaps the best thing to do might be to sit on your hands.
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