For bitcoin, the path of least resistance is to the downside.
At press time, the leading cryptocurrency is trading at $6,340 on Bifinex – down 3 percent from the high of $6,550 hit earlier today. The bulk of that loss came amid a dramatic drop over almost $100 in an hour soon before press time.
The minor recovery from the previous day's low of $6,300 was likely a product of oversold conditions reported by the short duration relative strength index (RSI) yesterday.
More importantly, the fact that the gains were erased so quickly indicates that bearish sentiment is still quite strong and the minor pop has likely recharged engines for further sell-off.
After a period of strengthening bull indicators over the last three weeks, the technical charts have now shifted toward the bears. As a result, a drop to $6,000 (February low) cannot be ruled out
As seen in the above chart, the last hourly candle confirmed a downside break of the rising wedge pattern, signaling an end of the technical recovery.
The major moving averages (MAs) – 50-hour, 100-hour, and 200-hour – are trending south in favor of the bears. More importantly, the RSI is aligning with the bears, having dipped below 50.00.
Over on the daily chart, BTC suffered a rising wedge breakdown on Wednesday, indicating the rally from the Aug. 14 low of $5,859 has ended and the bears have regained control.
Further, the negative price action yesterday bolstered the bearish setup.
Investors should also keep an eye on the line chart, as a pennant breakdown would boost the odds of BTC ending the week below $6,000.
- BTC could find acceptance below $6,300 (previous day's low) and may drop further towards the crucial support of $6,000 over the weekend.
- A weekly close below $6,000 would signal a revival of the long-term bear market.
- On the higher side, a technical recovery is seen above $6,550 (today's high), although with key intraday MAs trending south, gains may not be sustainable.
Disclosure: The author holds no cryptocurrency assets at the time of writing.
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