- BTC has traded in a narrowing price range over the last 48 hours, aborting the immediate bullish view put forward by Sunday’s double-digit gains.
- A range breakdown, if confirmed, would allow a price drop toward $7,200. That looks likely with multiple signs of bullish exhaustion on the daily chart.
- The outlook, however, would again turn bullish if the contracting triangle ends with a bullish breakout. In that case, the price could rise to $8,500.
Bitcoin is teasing a downside break of its recent trading range, having again faced rejection above $8,000 earlier today.
The cryptocurrency market leader jumped more than 12 percent on Friday, reviving the case for a potential break above the June 2018 high of $8,500.
The bullish momentum, however, fizzled out on Monday with prices falling from $8,200 to $7,581. Further, BTC remained on the defensive Tuesday, with prices clocking daily highs and lows within Monday’s trading range.
Essentially, BTC’s narrowing price range has created a contracting triangle over the last 24 hours, neutralizing the immediate bullish view put forward by Sunday’s rally.
The case for notable price pullback, suggested by repeated bull failures at $8,300 would strengthen if the indecision represented by the contracting triangle ends with a downside break.
As of writing, the lower edge of the trading range is seen at $7,805, while bitcoin is trading at $7,824, down 1.6 percent on the day.
While the short-term prospects are looking a little bleak, the long-term outlook remains constructive, with cryptocurrency reporting nearly 50 percent gains on the opening price of $5,267 seen May 1. Further, BTC is trading well above the 200-day MA, currently at $4,485.
A 4-hour close below $7,805 would confirm a triangle breakdown and open the door for a drop to $7,200.
Supporting the bearish case is the moving average convergence divergence (MACD) histogram, which has turned negative.
Further, the Chaikin money flow index is losing altitude, indicating weakening of buying pressure.
With prices trading well below $8,200, the bearish hammer (or hanging man) candle created on Monday is still valid. That candlestick is widely considered an early warning of a bullish-to-bearish trend change, as discussed yesterday.
Add to that, the three rejections at $8,300 seen in the last eight days, as well as the multiple failures to hold onto gains above $8,000, and the cryptocurrency appears overdue for a correction.
As a result, the narrowing price range looks likely to be breached to the downside.
As mentioned, a range breakdown would open the doors to $7,200. A UTC close below that level would expose the historically strong support of the 30-day moving average (MA), currently at $6,413.
Disclosure: The author holds no cryptocurrency assets at the time of writing.