While the bitcoin (BTC) market is still predominantly bearish, seller exhaustion near $3,500 may be paving the way to stronger corrective bounce.
The largest cryptocurrency by market capitalization printed a 14-month low of $3,474 on Monday, having revived the long-term bear market with a convincing move below the crucial 21-month exponential moving average (EMA) support on Nov. 14.
Therefore, the path of least resistance is to the downside. A possible coming drop to the psychological support of $3,000, however, may happen after a notable bounce. This is because BTC has picked up a strong bid today, validating the bearish exhaustion signaled by a repeated defense of $3,500 in the last three days.
At press time, the cryptocurrency is changing hands at $4,010 on Bitstamp, representing 8 percent gains on a 24-hour basis.
Today's positive price action also indicates the cryptocurrency is finally paying heed to oversold conditions reported by the 14-day relative strength index (RSI) since Nov. 15.
The long tails attached to the previous three candles, as seen in the chart above, represent bear failure near $3,500.
Further, the 14-day RSI is looking to move back into undersold territory above 30.00, having charted a bullish divergence over the weekend.
Over on the 4-hour chart, BTC has cleared the falling trendline resistance (yellow line), adding credence to the bullish divergence of the RSI confirmed on Nov. 25 and the long-tailed daily candles.
As a result, BTC looks poised for a convincing move above $4,000. The recovery rally, however, may have a tough time scaling the falling channel hurdle, currently at $4,450, as the key exponential moving averages (EMAs) – 50, 100 and 200 – are still trending south in favor of the bears.
- BTC looks to have carved out a temporary bottom around $3,500, and prices could rise to $4,400 in the next day or two.
- A falling channel breakout above $4,400 may not happen in the near-term, as the EMAs are still biased toward the bears.
- The long duration charts still favor a drop to $3,000 (psychological support). The bullish view put forward by the 4-hour chart would be neutralized if prices find acceptance below $3,500.
Disclosure: The author holds no cryptocurrency assets at the time of writing.
Bitcoin image via CoinDesk archives; charts by Trading View
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