After an overnight drop, bitcoin looks to have found acceptance below $9,000 and risks a deeper pullback, the technical charts indicate.
The cryptocurrency hit a one-week low of $8,652 on Bitfinex earlier today and is now trading at $8,700. The 10-percent decline from the weekly high of $9,767 on Wednesday has neutralized the immediate bullish outlook.
Further, the failure to hold above the key technical levels – descending (bearish biased) 100-day moving average (MA) of $9,126 and the double top bearish reversal neckline of $9,280 – will be discouraging for the bulls.
However, only a break below $8,459 would signal a short-term bearish reversal and open the doors for a deeper sell-off.
BTC created a bearish outside-day candle on Wednesday (trading range was wider than Tuesday's high/low), which, as per textbook rules, is a sign of sudden bearish reversal. That said, traders and analysts usually want to see negative price action on the following day, before calling a bearish reversal.
Accordingly, only a close (as per UTC) today below the key support of $8,459 (April 15 high) would confirm a short-term bullish-to-bearish trend change and open doors for a deeper pullback.
However, BTC is showing signs of a negative follow-through, as currently it is trading under the previous day's low of $8,765 – though the downside is capped by the ascending (bullish) 10-day moving average at $8,706 and the gradually ascending (bullish) 4-hour 50-day MA.
BTC may regain some poise if the bulls manage to defend the 4-hour 50-day MA in the next few hours. On the other hand, a failure to hold above the bullish 4-hour 50-day MA and 10-day MA would boost the odds of sustained drop below $8,459.
Confirmation of a bearish outside-day reversal would open up downside towards $7,823.
A daily close (as per UTC) below that level would signal a violation of higher lows and higher highs pattern (bullish setup) and would also mean the long-term descending trendline breakout has failed. In such a case, BTC could revisit the April 1 low of $6,425.
BTC will likely revisit $9,280 if the bulls manage to defend the 4-hour 50-day MA and 10-day MA in the next few hours.
Acceptance above $9,280 would expose the 200-day moving average, currently located at $9,853.
Water drop image via Shutterstock
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.