With signs of bull exhaustion showing on the technical charts, bitcoin (BTC) faces a return to the psychological support of $7,000.
At press time, the cryptocurrency is changing hands at $7,235 on Bitfinex – representing a 0.4 percent drop on a 24-hour basis.
Prices found acceptance above $7,000 over the weekend, having cleared the resistance offered by the 50-day and 100-day moving averages (MAs) last week and rose to $7,429 yesterday – the highest level since Aug. 4.
While the bull grip around BTC strengthened in the last seven days, prices failed to cut through the resistance of the trendline sloping upwards from the June 29 low and Aug. 12 low, possibly due to buyer exhaustion. This should not come as a surprise as BTC has rallied nearly 27 percent in the 2.5 weeks without notable price pullback.
As a result, BTC could feel the pull of gravity in the next 24 hours, although overall outlook remains bullish as long as prices do not find acceptance below $7,000.
As seen in the above chart, BTC created a gravestone doji candle yesterday, suggesting the upside momentum has weakened – that is, the bulls failed to push prices above the trendline hurdle and the bears regained lost ground.
Further, the relative strength index (RSI) rolling over from above 80.00 (overbought territory) is calling for profit taking or healthy pullback.
Prices could, therefore, drop to the rising wedge support, currently seen at $7,040, but, with the 100-candle MA crossing the 200-candle MA from below (bull cross), the support will likely hold.
The stacking order of the 50-candle, above the 100-candle, above the 200-candle, is a typical bullish signal.
The daily chart shows that the 5-day and 10-day MAs continue to trend north, indicating a short-term bullish setup, as well as a bullish crossover between the 50-day and 100-day MAs. The RSI, too, is biased toward the bulls.
Only if the bears manage to pull off a downside break of the rising wedge is a deeper sell-off likely.
- BTC could be in for a minor pullback to $7,040–$7,000 in the next 24 hours.
- The overall bias remains bullish, as seen in the daily chart, hence, BTC will likely defend the support at $7,000 and could resume the journey back towards $7,500.
- A downside break of the rising wedge would signal a bear revival and shift risk in favor of a drop to support at $6,650 (multiple daily highs).
Disclosure: The author holds no cryptocurrency assets at the time of writing.