Bitcoin Faces Resistance at $85K as Ichimoku Cloud Limits Upside: Risk-Reward Unfavorable for Bulls
Bitcoin’s recent price action has been hindered by the Ichimoku Cloud, creating a less favorable risk-reward scenario for bullish traders, according to CoinDesk’s technical analyst and Chartered Market Technician, Omkar Godbole.
In trading, securing the ideal entry point is crucial, as timing and levels greatly influence the risk-reward ratio and can tilt the odds of success in favor of traders.
While bitcoin’s (BTC) short-term outlook may seem positive with increased bullish activity in the options market, its proximity to significant resistance levels that have previously capped upward momentum raises concerns. The current market situation, where bitcoin faces a key resistance level, weakens the risk-reward proposition for those hoping to profit from further price increases.
Since Saturday, BTC has been testing the lower boundary of the Ichimoku Cloud, which is hovering around the $85K mark. The Ichimoku Cloud, created by Japanese journalist Goichi Hosoda in the 1960s, is a technical analysis tool that provides insight into market momentum, support, and resistance levels.
The indicator uses five main components: Leading Span A, Leading Span B, the Conversion Line (Tenkan-Sen), the Base Line (Kijun-Sen), and a lagging closing price line. The space between Leading Span A and B forms the cloud, with its upper and lower boundaries acting as potential support and resistance zones. A price above the cloud signals a bullish trend, while a price below indicates bearish conditions.
In early February, BTC dropped below $100K and traded beneath the Ichimoku Cloud, which marked a significant shift in market sentiment. Since then, the lower boundary of the cloud has served as a formidable resistance zone, stifling any attempts at price recovery.
As BTC approaches this resistance again near $85K, bulls looking to enter the market may face some challenges. The immediate upside appears limited by the cloud’s resistance, while support lies below $75K, nearly $10K lower than the current market price. This creates an unfavorable risk-reward scenario for those holding long positions.
The rejection at the Ichimoku Cloud on April 2 triggered a major sell-off, pushing BTC down to below $75K, echoing a similar pattern seen after a rejection on February 21.
Therefore, the current interaction with the cloud’s resistance warrants close observation, as a further rejection could lead to selling pressure and a retreat back to the $75K level.
However, if BTC breaks above $90K, surpassing the cloud’s upper boundary, it would signal the potential resumption of the broader bull market and could lead to a rally toward new record highs.
