Bitcoin (BTC) could be in for a minor bout of consolidation following an 11 percent drop from recent highs above $8,500.
At press time, the cryptocurrency is trading at $7,570 on Bitfinex, having clocked a nine-day low of $7,469 earlier today.
A minor correction was overdue, though, as BTC had looked overbought a week ago at the two-month high of $8,507. Things took a turn for the worse in the last 24 hours, as BTC's overlong sideways action ended with a downside break and the bargain hunters failed to turn up at the key support of $7,800.
As a result, the cryptocurrency ended up retracing more than 35 percent of the rally from the June 24 low of $5,755.
Clearly, the tide has turned in favor of the bears in the last 24 hours, although oversold conditions and indecisiveness seen in the short duration charts will likely keep the cryptocurrency range-bound in the next 24 hours.
The above chart shows BTC has created a doji candle at the key support of $7,455 (38.2 percent Fibonacci retracement), indicating indecision in the market.
A minor corrective rally to $7,800 could be on the cards if the current 4-hour candle closes above the previous doji candle's high of $7,587. The relative strength index (RSI) is holding well below 30.00, signaling oversold conditions. So, this appears to be the most likely scenario.
That said, the gains will likely be short-lived as 5-candle and 10-candle moving averages (MAs) are trending south, indicating a bearish setup. Further, the cryptocurrency has found acceptance below the key support of $7,815 (July 27 low), meaning the bears are in control.
Acceptance below the immediate support of $7,456 (38.2 percent Fibonacci retracement) would strengthen the bear case, although oversold conditions are seen capping losses around $7,400.
- BTC is seen trading the narrow range of $7,400–$7,800 in the next 24 hours.
- BTC's bull run from the June 24 low of $5,755 has ended, but only a daily close (as per UTC) below the 100-day MA of $7,574 would confirm a bearish reversal.
- On the higher side, a daily close (as per UTC) above $8,000 would shift risk in favor of a rally to 200-day (MA), currently located at $8,405.
Disclosure: The author holds no cryptocurrency assets at the time of writing.