Potential BTC Demand Zone around $ 75k as Price Slide Looks like a ‘breakout and retest’ play textbook
Remember the last time you went on vacation? After locking the door and heading to your car, you are likely to return suddenly to make sure the lock is safe before your journey continues.
Financial markets, led by a set of human emotions, show similar behavior. After a convincing move beyond a prolonged resistance, the assets usually return to confirm the efficacy of the breakout. It serves as a test of the strength of the former supporting resistance, following which the larger rally opens.
The “Breakout and Retest Play” phenomenon is well-known in the asset classes. The ongoing sale-off of Bitcoin (BTC) can be just a healthy breakout point or the previous support of the fight of $ 73,835 damaged in November.
In other words, the descending momentum may run out of steam to or closer to these levels, which is the potential to set the stage for larger running.
The BTC dropped more than 15% to under $ 80,000 this month, exposing the previous support for resistance to $ 73,835. Prices ruined the upper level in early November, ending the month of combining after pro-crypto Donald Trump won the US presidency election.
The tendency of markets to restrace or revisit the breakout point before presenting more rallies has its roots in aspects of investment behavior.
People are generally risk that it is not dangerous when it comes to securing the gains. So, when facing income, entrepreneurs quickly booked them instead of allowing winning trade to run wild. The so -called Prospect theory Explains why steam suddenly runs out of the post-breakout rally, which often leads to a breakout point retest. BTC holders have gained revenue around the $ 100k mark since December.
Now, as prices lower and close to the breakout point, in this case, $ 73,835, market participants who missed the initial jump rally, ensuring the level of hold. The resulting bounce from the former resistance-turn-support gets more and more consumers, which potentially yield a larger rally.
That certainly happened in the third quarter of 2023 and August-September 2020.
On the same occasion, Breakout and Retest made a bigger rally on new record highs. Businessmen, however, need to note that a failed retest or a lack of a significant bounce indicates the underlying weakness that may emerge in a full blown dowrend.
Over the years, I’ve seen many examples of breakout/breakdown retests that lead to greater motion in traditional markets.
Consider the yield in the Japanese government’s 10-year bond. It triggered a double-bottom breakout in January 2024 and revised the breakout level several times before rising to multi-year highs.
The AUD/USD pair dives out of a major support trendline in December, indicating a deeper slide. The pair has been able to resist the trendline resistance early this month to see sharp losses this week.
