Bitcoin’s (BTC) price pullback from the recent highs above $8,500 is increasingly looking like a short-term bear market on the technical charts.
The leading cryptocurrency fell to a two-week low of $7,282 earlier today on Biffinex and was last seen trading at $7,350 – down 3 percent on a 24-hour basis.
The sell-off from the recent high of $8,507 had shown signs of exhaustion near $7,455 (38.2 percent Fibonacci retracement of the rally from the June low of $5,755) on Wednesday, raising prospects of a move higher to $8,000.
However, BTC did not find takers on Thursday and the resulting failure to capitalize on the signs of bearish exhaustion ended up encouraging the bears to push the cryptocurrency down to two-week lows as expected.
At press time, BTC has found acceptance below the key support of $7,455 and has retraced 40 percent of the rally from $5,755 to $8,507. What’s more, the cryptocurrency also closed yesterday below the former resistance-turned-support of the 100-day moving average (MA).
As a result, BTC appears to have entered a short-term bear market. The price chart analysis shows the prices could drop further to $7,130.
BTC closed below the 100-day MA yesterday, adding credence to the signs of a short-term bearish reversal: a bearish crossover between the 5-day and 10-day moving averages (MAs) and a downside break of the ascending trendline by the relative strength index (RSI).
Moreover, the 100-day MA had acted as stiff resistance before it was taken out on July 23. It is worth noting that BTC rallied by $800 on the following day, boosting the 100-day MA’s appeal as a key technical level.
Hence, the bears could be feeling emboldened, having cleared the 100-day MA support yesterday. Further, BTC has also dropped below $7,455 (38.2 percent Fibonacci retracement), which served as good support earlier this week.
And last but not the least, the relative strength index (RSI) has dipped below 50.00 (in bearish territory).
Clearly, the tide has turned in favor of the bears – at least for the short-term – and a further drop could be on the cards, albeit after a re-test of the 100-day MA of $7,583.
The RSI is hovering below 30.00, indicating oversold conditions and the chart also shows a bullish divergence of the RSI. Hence, a minor rally to $7,583–$7,600 cannot be ruled out, although the gains will likely be short-lived, courtesy of the bearish setup on the daily chart.
- Bitcoin’s close below the 100-day moving average (MA) on Thursday has confirmed a short-term bullish-to-bearish trend change and opened the doors to $7,130 (50 percent Fibonacci retracement of the rally from the June 24 low of $5,755).
- A minor corrective rally to $7,600 cannot be ruled out, courtesy of the oversold conditions reported by the 4-hour chart.
- Only a convincing move above $8,000 would allow the bulls to dominate the proceedings.
Disclosure: The author holds no cryptocurrency assets at the time of writing.