The price of bitcoin (BTC) is stuck in a $400 range defined by key technical levels, and the direction of the breakout will likely set the tone for the next move in the cryptocurrency.
The trading range's lower end is $6,341, a double bottom neckline (former resistance-turned-support), which was scaled on June 30. Meanwhile, $6,754 (a 23.6 percent Fibonacci retracement of the sell-off from $9,990 to $5,755), which put brakes on BTC's rally earlier this week, marks the upper end of the trading range.
A convincing move above $6,754 would signal a resumption of the rally from $5,755 (June 24 low) and would open the doors to $7,000, as indicated by the double bottom breakout and bull flag breakout earlier this week.
On the other hand, the bullish case would weaken significantly if prices find acceptance below $6,341.
That said, the short duration charts indicate the odds are stacked in favor of a downside break of the trading range. At press time, BTC is changing hands at $6,520 on Bitfinex - down 1 percent on a 24-hour basis.
The bears may feel emboldened by BTC's transition from rising channel (bullish setup) to falling channel (bearish setup), as seen in the chart above.
Further, Bollinger Bands (standard deviation of +2,-2 on 20-hour moving average) are trending south, indicating a bearish setup.
BTC is also trading below 50-hour and 100-hour moving average (MA), indicating the path of least resistance is to the downside. More importantly, 50-hour MA risks falling below 100-hour MA in the next few hours (bearish crossover).
The downside break of the rising channel yesterday added credence to the bearish relative strength index (RSI) divergence and strengthened the bear case.
The chart also shows Bollinger Bands that have adopted bearish bias (beginning to fall).
- BTC risks falling below $6,341 (double bottom neckline - former resistance-turned-support, the lower end of the trading range) as indicated by the bearish setup on the hourly and 4-hour chart.
- Acceptance below $6,341 would abort the bullish view put forward by the double bottom breakout, bull flag breakout and bullish falling channel breakout and would shift risk in favor of a drop below $6,000.
- On the higher side, an aggressive move above the significant obstacle of $6,754 (23.6 percent Fibonacci resistance) would bolster the already bullish technical setup on the daily chart and open doors to $7,000.
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