The psychological pull of resistance and support is at work in the Bitcoin (BTC) price rally. The price will need to take this psychology into consideration as it moves higher into a higher range.
Here are three psychological moves that are likely to take place in the course of the price rise:
Lower Lows: Resistance at lower lows could represent a level to test and be challenged at. This may provide an opportunity for the sellers to put a resistance level at lower lows.
If the selling continues upward, a target support level is likely to be formed at lower lows. Should the strength of the sellers continue, a break out will be essential to break through this level.
Buyers will likely get their first opportunity to attack from a distance when the bulls are below support and below target support level. Many times buyers will push downward on the price towards lower lows but fail to break through. In fact, many times this move could even be successful if the buyers are not too aggressive.
Higher Lows: The failure of the bulls to break through lower lows could signal a new level for buyers to begin pushing on. Lower lows could also represent a confirmation of the correct resistance level. In this case, the price may be encouraged to continue moving higher, especially if support is already breached.
If buyers do not break through lower lows, a target support level may form, indicating that the price could be turned higher. At this point, another psychological move islikely to take place, with sellers making an attempt to turn the price lower on its final leg.
Psychological Upper Lows: Upper highs represent a key psychological level to watch. A breakout on this level could signal the price is set to take on a sharp turn up.
It is important for the bulls to continue pushing upward to maintain the momentum before the upper highs, if possible. Further, if the buyers find it difficult to maintain this downward push, they will likely retrace to the initial higher lows for confirmation. If this happens, the buyers will likely be disappointed and back to try the proper replacement pattern.
If the replacement pattern shows that the upper highs are broken, then the buyers will likely want to continue their downward momentum to find support at the target support level. A confirmation of a break will be vital to keep the price above the resistance level.
Psychological Breakout: If the upward momentum continues through the psychological break out of the resistance and support levels, the price will likely continue on its way up. A new high may be reached in this fashion and continue moving higher into the next major support level.
For a bull that sets the floor below the support and resistance levels, this psychological move may indicate a new target support level. A break out may be necessary to clear the traders for a new all time high.
Support and resistance to trade together. A psychological level may be crucial to indicate if the support and resistance levels are now broken. The bulls may want to continue their momentum to test and clear the new psychological support level.