Remember the last time you went on vacation? After locking the door and heading toward your car, you likely turned back abruptly to ensure the lock was secure before continuing your journey.
Financial markets, led by a range of human emotions, exhibit similar behaviors. After a convincing move beyond a long-held resistance, assets typically return to confirm the validity of the breakout. That serves as a test of the strength of the former resistance-turned-support, following which bigger rallies unfold.
The “breakout and retest play” phenomenon is well-known across asset classes. Bitcoin’s (BTC) ongoing sell-off might be just that – a healthy retest of the breakout point or the former resistance-turned-support of $73,835 breached in November.
In other words, the downward momentum could run out of steam at or closer to these levels, potentially setting the stage for a bigger run higher.
