- Bitcoin is on the defensive, having closed below $8,000 last week. The price has also established a bearish lower high at $8,135.
- A short-term bullish-to-bearish trend change, however, would be confirmed if the price drops below $7,432 (June 4 low), establishing a lower low.
- With the weekly chart reporting a bearish candlestick pattern, a UTC close below $7,432 looks likely.
- The daily relative strength index's move above the falling trendline would revive the short-term bullish outlook.
Bitcoin's (BTC) bulls need to keep prices above key support at $7,432 to avert a short-term bearish reversal.
At the current price of $7,685 (as per Bitstamp), the leading cryptocurrency by market value is down 15 percent from the May 30 high of $9,097 – the highest level since the same month in 2018
Even so, it is still too early to call a bearish reversal as BTC is yet to confirm the most basic of all bearish chart patterns, a paired lower high and lower low.
A lower high has been established, though, with the bounce from the June 4 low of $7,432 topping out at $8,135 on June 7.
Therefore, the immediate outlook is neutral and a bearish reversal would only be confirmed if BTC drops below $7,432 to print that lower low.
With the price currently trading at $7,730, the short-term bullish-to-bearish trend change is less than $300 away.
The lower high created by BTC’s shallow bounce from the June 4 low of $7,432 looks to be the right shoulder of a head-and-shoulders bearish reversal pattern.
A UTC close below $7,432 would activate twin bearish cues: a lower high/lower low and a head-and-shoulders (H&S) breakdown.
The H&S breakdown, if confirmed, would create room for a drop to $5,800 (target as per the measured move method). On the way lower, BTC may find support at the 50-day MA, currently at $7,000.
With the relative strength index (RSI) reporting a bearish divergence, a close below $7,432 looks likely.
BTC fell 12.6 percent last week and closed Sunday (UTC time) well below $8,000, validating the bullish exhaustion signaled by the previous week’s doji candle.
Essentially, the doji candle and the bearish follow-through indicate the period of indecision or exhaustion in the market place has ended with the bears victorious.
The risks, therefore, are skewed to the downside.
Disclosure: The author holds no cryptocurrency assets at the time of writing.
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