Bitcoin (BTC) is trapped in a no-man's land between $6,200 and $6,600, technical charts indicate.
A bear flag breakdown witnessed Monday was expected to yield a drop to $6,000 (February low), but bitcoin's resilience spoiled the bear party.
The leading cryptocurrency bounced off trendline support at $6,202 on the same day and has since risen back above $6,350, neutralizing the immediate bearish outlook.
At press time, BTC is changing hands at $6,320 on Bitfinex – up 1.23 percent on the day.
While BTC's defense of the trendline support is encouraging, a bearish-to-bullish trend change would be confirmed only after BTC has moved above the Sept. 14 high of $6,600.
As can be seen, the trendline from June lows (the lower end of the pennant) has worked as a strong support this month and is the level to beat for the bears.
As of writing, pennant support is located at $6,225. A UTC close below that level would confirm a pennant breakdown – a bearish continuation pattern – which would signal a revival of the sell-off from May highs near $10,000.
A breakdown, if it comes, could prove costly: the relative strength index (RSI) of 41.00 is bearish and well above oversold levels, suggesting plenty of scope for a price drop.
Meanwhile, on the higher side, a move above $6,600 (Sept. 14 high) would negate Monday's big bearish outside-day candle and confirm a short-term bullish reversal.
The bear flag breakdown on the 4-hour chart failed to produce a bearish move toward $6,000. More importantly, BTC has re-entered the flag pattern, weakening the bearish case.
That said, the stacking order of the 50-candle moving average (MA), below the 100-candle MA, below the 200-candle MA, indicates the path of least resistance is to the downside.
Further, the RSI is beginning to roll over in favor of the bears. So, it seems safe to say that prospects of a bull breakout above $6,600 are low.
- BTC lacks a clear bias, having defended the pennant support in the last two days.
- A pennant breakdown will likely yield a drop to the crucial support levels of $5,859 (August low) and $5,755 (June low).
- BTC bulls may feel emboldened if the rebound from the pennant support seen on Monday is followed by a convincing move past $6,600 (Sept. 14 high) in the next few days. In this case, BTC could attack the psychological hurdle of $7,000.
Disclosure: The author holds no cryptocurrency assets at the time of writing.