Following yet another record high at the weekend, bitcoin is trading on the back foot today.
The world's largest cryptocurrency rose to fresh all-time high of $7,601.39 on Sunday, as per CoinDesk's Bitcoin Price Index (BPI). However, the pop was short-lived, and prices soon fell back below the previous record high of $7,454.05 recorded Nov. 3.
Notably, this is the third time in the last week that BTC has failed to hold above $7,400, despite having clocked a new high.
So what's stopping the bulls from attacking the $8,000 mark? Though the exact cause is unclear, the following factors could be behind the trader reticence above $7,400.
To start with, comments on social media indicate investors are seeing the likelihood of a short-term pullback, and the resulting caution may have weakened the bid tone.
At the time of writing, the bitcoin-U.S. dollar exchange rate (BTC/USD) is at $7,395 levels. As per CoinMarketCap, BTC has dropped around 2 percent in the last 24 hours. Despite repeated failure to hold above $7,400, the dips below $7,200 have been short-lived.
Still, there is merit in being cautious, as the price action analysis indicates that a potential bearish reversal pattern could be in the making.
The above chart shows:
- Bearish price – RSI (relative strength index) divergence has been confirmed
- Prices failed to take out the 4-hour 50-MA level of $$7,425
- 4-hour 50-MA has topped out (i.e. it has shed bullish bias).
- The bearish price-RSI divergence, with the failure to take out 4-hour 50-MA today and the fact that the moving average has topped out, indicates potential for a drop to $7,044 (head and shoulders neckline).
- A 4-hour close below $7,044 would signal that the rally from the low of $5,376 (Oct. 25 low) has topped out and could yield a much needed healthy correction to $6,400 - $6,189 (Oct. 21 high).
- On the higher side, consolidation around $7,500 could translate into a fresh rally to $8,000 levels.
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