- Bitcoin's recovery from $9,755 to $10,255 seen in the last 24 hours lacks volume support and could be short-lived.
- Supporting the case for a drop back to $9,755 are the rising-wedge breakdown on the hourly chart and a bearish candlestick pattern on the 3-day chart.
- Wednesday's rising-wedge breakdown on the 4-hour chart is still valid and favors a drop to $9,467 (Aug. 15 low).
- Bearish pressures would weaken if prices print a UTC close above the bearish lower high of $10,956. A weekly close (Sunday, UTC) above $12,000 is needed for bullish revival.
The path of least resistance for bitcoin (BTC) remains to the downside, despite a price bounce to $10,200 seen in the last 24 hours.
The top cryptocurrency by the market value found bids below the widely-followed 100-day moving average support at $9,900 on Wednesday and rebounded to a high of $10,255 earlier today.
Investors may feel tempted to call a bullish move, as a similar recovery from sub-100-day MA level seen on Aug. 15 was followed by a $1,000 rally to highs above $10,900 by Aug. 20.
The latest price recovery, however, looks unsustainable due to lack of volume support, as seen in the chart below.
In the above chart, the green bars represent buying volumes and the red bars represent selling volumes.
The green bars seen in the last 24 hours are smaller compared to the red bars observed during the price drop $10,600 to $9,755.
Put simply, the buying pressure remained weak as prices rose from $9,755 to $10,255. A low-volume bounce is often short-lived.
Also, the cryptocurrency has dived out of a rising wedge – a bearish reversal pattern which indicates the corrective bounce from $9,755 has ended and the bears have regained control.
As per technical theory, the price seen at the beginning of a rising wedge formation becomes the minimum downside target once a breakdown is confirmed. So, a fall back to $9,755 could be on the cards.
A rally to $10,550-$10,600 could be seen if prices break above the wedge's high of $10,255 with decent volumes. The outlook, however, will remain bearish as long as prices are held below $10,956.
Daily and 4-hour charts
BTC's bounce from the 100-day MA support seen on Aug. 15 ended up charting a bearish lower high (shallow bounce) at $10,956 on Aug. 30 (above right).
So, $10,956 is the level to beat for the bulls in the short-term.
The case for a drop to $9,467 put forward by the rising wedge breakdown on the 4-hour chart (above right) earlier this week will remain valid as long as prices are held below $10,807 – the high of the candle confirming the breakdown.
BTC created a bearish outside bar candlestick pattern in the three days to Aug. 20. A bearish outside bar appears when a specific period's price action engulfs the preceding period's high and low.
That candlestick pattern marks a continuation of the selloff from the high of $12,325 reached in the first week of August.
All-in-all, the probability of BTC falling to the recent low of $9,467 in the short-term seems high. The outlook as per the three-day chart would turn bullish if and when prices find acceptance above the trendline connecting June and July highs.
As of writing, BTC is changing hands at $10,140 on Bitstamp, representing a 1.5 percent gain on a 24-hour basis.
Disclosure: The author holds no cryptocurrency assets at the time of writing.
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