Bitcoin Eyes $6K After Key Resistance Fails to Hold
Bitcoin's retreat from the weekly highs may have set the tone for a drop to $6,000 over the next 24 hours.
Bitcoin (BTC) risks falling to $6,000 in the next 24 hours, but there is limited room for a drop below that level, the technical studies indicate.
BTC's retreat from the weekly high of $7,509 to $6,600 not only marks a failure on the bulls' part to hold prices above the key resistance of $7,240 (March 18 low), but also signals continuation of the bearish "lower" highs pattern (marked by hand signs) as seen on the chart below.
As of writing, the cryptocurrency is changing hands at $6,565 on Bitfinex – down 3.9 percent from Thursday's close (as per UTC) of $6,769.
The third lower high (i.e. drop from $7,509 to $6,600) indicates the corrective rally has ended. However, only an acceptance under $6,425 (April 1 low) would establish the third lower low and open the doors for a drop to $6,000 (February low).
That said, the hourly chart and linear-scaled daily chart below do indicate the possibility of a drop below the key support.
The downside break of the bearish pennant, a bearish continuation pattern, indicates the sell-off from $7,509 has resumed and prices could drop to $6,355 (target as per the measured height method, i.e. pole height subtracted from breakdown price).
Interestingly, the downside, as suggested by the bearish pennant breakdown, is very near to the falling channel support seen around $5,365 on the daily chart.
Additionally, BTC seems to have found acceptance below a key ascending trendline support.
Daily chart (linear scale)
BTC is trading well below the rising trendline (drawn from the July low and September low), which is bad news for the bulls. The trendline acted as strong support earlier this week. Also, the sell-off seen in February had run out of steam near the trendline support.
Clearly, the charts are aligned for a bearish move. However, a drop below $6,000 will likely push the daily relative strength index (RSI) below 30.00 (oversold territory) and could limit the sell-off. Note that the RSI currently stands at 32.80.
BTC looks set to clear the immediate support at $6,425 and drop towards $6,000 (February low).
A further drop towards $5,400–$5,300 cannot be ruled out, but will likely be short-lived, as the RSI will likely show oversold conditions by then.
Bearish invalidation scenario: On the higher side, a clear break above $6,938 (previous day's high), would add credence to previous day's doji candle and boost the odds of a move higher to the falling-channel resistance, currently seen around $7,580.
Bitcoin on edge image via Shutterstock
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