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  • Bitcoin created a doji candle yesterday, signaling buyer exhaustion near the crucial 21-week moving average (MA) resistance at $4,073. As a result, a price pullback could be in the offing in the next 24 hours.
  • A break below $3,930 (flag support on 4-hour chart) would further strengthen the case for a pullback and expose support levels lined up at $3,890 and $3,755.
  • The doji candle would be invalidated if prices find acceptance above $4,000 in the next few hours, confirming a bull flag breakout on the 4-hour chart. That could yield a rally to the bearish lower high of $4,236 created on Dec. 24.
  • Any gains above the 21-week simple moving average of $4,073 will likely be transient, though, as long as that average is sloping downwards.

Bitcoin (BTC) is showing signs of buyer exhaustion and could see a minor pullback unless resistance at $4,000 is scaled in the next few hours.

The crypto market leader witnessed two-way business yesterday before closing (UTC) on a flat note at $3,969 on Bitstamp. Essentially, BTC created a doji candle, which is widely considered a sign of indecision in the marketplace.

Notably, the fact that the doji candle has appeared close to the historically strong resistance of the 21-week simple moving average (SMA), currently at $4,073, suggests the indecision is predominantly among the bulls and could be considered a sign of buyer exhaustion.

So, a price pullback could be on the way, especially if support at $3,930 is breached in the next few hours. That said, the rally from the March 14 low of $3,775 could resume if prices rise above the resistance at $4,000, invalidating the doji candle.

As of writing, BTC is changing hands at $3,975, representing a 0.4 percent gain on a 24-hour basis.

Daily and weekly charts

On the daily chart, BTC looks to be creating the right shoulder of an inverse head-and-shoulders pattern, having bounced up from the rising trendline last week. The 5- and 10-day MAs are also trending north, indicating a bullish setup.

Even so, the rally has stalled near $4,000 and a doji candle has appeared, validating the bearish view put forward by the descending 21-week SMA, currently at $4,073.

BTC, therefore, risks falling back to the rising trendline support at $3,890. A break lower would expose the March 14 low of $3,775.

It’s worth noting that bitcoin may have a tough time scaling or holding onto gains above the 21-week SMA as long as that average is trending south.

4-hour chart

As can be seen, BTC has created a minor bull flag – a continuation pattern that usually accelerates the preceding bullish move.

A break above the upper edge of the flag, currently at $4,000, would open the doors to $4,305 (target as per the measured move method)

However, the bullish exhaustion signaled by the doji candle would gain credence if prices fall below the flag support at $3,930. In that case, BTC will likely revisit key support levels at $3,890 and $3,755.

Disclosure: The author holds no cryptocurrency assets at the time of writing.

Bitcoin image via Shutterstock; charts by Trading View

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This article is intended as a news item to inform our readers of various events and developments that affect, or that might in the future affect, the value of the cryptocurrency described above. The information contained herein is not intended to provide, and it does not provide, sufficient information to form the basis for an investment decision, and you should not rely on this information for that purpose. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.