Reversal Hammer Follows Bitcoin Bloody Monday: Further Loses?

Bitcoin price closed at $18K last night and then immediately plunged to the low $18K region during the early morning hours of Monday. Since BTC has managed to bounce back and almost touch the $19K level, but is still 4% lower than yesterday.

Bulls Stop Bears Short

Bitcoin is forming a hammer, a bullish reversal signal that occurs when a key price objective is reached. This type of signal is usually seen in Japanese candlesticks.

Daily, the price action doesn’t have much significance. However, it did confirm the signal after it hit the lower Bollinger Bands. The strength behind the move was weak, even though the depth of the move was significant.

The falling stochastic line has also supported the price action. However, holding above this level could lead to short-term rallies, though the past price action has already fallen back.

The weekly candle in Bitcoin is currently a hammer, as indicated by the first day of the week. It’s unlikely that this candle will stay that way, as the price is currently hanging on to the former all-time high resistance. The head of the candle body is also above the former high.

The move lower was especially disappointing for bulls, as it prevented any long-term investors from entering a position. Only those who could enter a long position on the wick at $17,500 were left.

Bitcoin’s extreme bearish sentiment and the macro situation have led to the assumption that new lows are likely to be established. However, the weekly timeframes have been showing signs of weakening bullish momentum. That suggests that a hammer candle might be a good buy signal.

If the weekly candle closes above the green line, the price could break through the LMACD and test the 2018 bear market bottom. That would trigger a sustained rally.

September Has 11 Days Left For Bitcoin Bulls

The last 11 days of the monthly candle are still left, and bulls have a lot of time to prevent a deeper selloff in BTC.

The current candle looks ugly, but it should be noted that the previous highs and lows were at the beginning of a meaningful reversal. A doji pattern could be the prelude to a cluster of support that will likely prevent further declines.

The onus is on the bulls to show strong resistance within the next 11 days to end the bear market’s momentum. In the past, the histogram would turn pink to signal that the market was starting to believe that the bulls were regaining control.

How Will September End?

The recovery of Bitcoin is in danger as the financial sector continues to decline. Even if it hits the $20,500 resistance level, it may not be able to sustain its gains.

Despite the various indicators indicating that Bitcoin is entering a new phase, the expert cryptoanalyst @woonomics claims it is still not yet at rock bottom. He noted that only 52 percent of the coins are underwater.

According to him, if Bitcoin reached its previous lows, it would not be at $18,000. He noted that the larger financial sector must step up and restore its confidence for the cryptocurrency to recover.

The Stoch-RSI convergence may boost Bitcoin’s price, but it is not expected to lead to recovery. The current market dynamics are not favorable for cryptocurrency this September.

Fed Rate Hikes & Jittery Traders

Fear has been rising among investors and traders due to the Federal Reserve’s quantitative tightening program and high inflation.

The stock market’s reaction to this new anxiety was swift and brutal. From the 10th to the 18th of September, the price of gold dropped by 26.02 percent. That marked the end of the supposed recovery seen in August.

The price of Ethereum can bounce back from its initial decline. There are two ways that investors can react to this: buy the dip immediately or wait for the price to recover. If the market goes through an initial decline, it is more likely that traders will start to profit from it. The Stoch oscillators are also providing strong signals that suggest a potential reversal.

The market’s recent movements are also aligned with the XABCD harmonic patterns. That can be an indication of a potential buy signal.