Bitcoin Bulls Need to Defend $7K as Corrective Rally Stalls

Bitcoin's (BTC) corrective rally has run out of steam in the last 12 hours.

While that's not good news for the bulls, only a clear break below $7,000 would kill the odds of a move higher to $7,800–$8,000, the technical charts indicate.

The cryptocurrency clocked a high of $7,509 at 19:00 UTC yesterday, according to Bitfinex data, before retreating to $7,070 at time of writing.

The pullback has neutralized the immediate bullish outlook. Furthermore, the cryptocurrency has created a minor, bearish head-and-shoulders pattern, as seen in the chart below.

A break below $7,250 (head-and-shoulders neckline) would add credence to the breach of the ascending trendline and will likely yield a drop to $7,000 (target as per the measured height method). That would mean the corrective rally from the low of $6,425 has ended, given the head-and-shoulders is a bearish reversal pattern.

However, the momentum studies are still biased to the bulls: 50-hour moving average (MA) and 100-hour MA are climbing, while the 200-hour MA has shed bearish bias (flatlined). So for now, it appears any dip to or below $7,000 will likely be short-lived.

That said, the odds of a corrective rally to $7,800 (channel resistance) and $8,000 (psychological mark) would drop sharply if BTC closes (as per UTC) below $7,000.

BTC closed yesterday above the key resistance (now support) of $7,240 (March 18), strengthening the case for a corrective rally to $7,800.

The 5-day MA has turned higher (adopted bullish bias) in response to the uptick in prices.

If, however, bitcoin closes below $7,000 today, it would add credence to the downward sloping (bearish biased) 10-day MA and signal failure to hold above $7,240. Further, the 5-day MA would adopt a bearish bias, derailing the bottoming out process.

Hence, BTC needs to defend $7,000 to avoid further losses.

Bitcoin image via Shutterstock