- Bitcoin is defending the key 200-day moving average support for the third consecutive day and may see a minor bounce to $8,700.
- A corrective bounce, if any, will likely be short-lived, as the daily and weekly chart indicators are biased bearish. The cryptocurrency will remain on the hunt for a drop to $7,500, as discussed yesterday, as long as the resistance at $9,097 is intact.
- A break above $9,097 is needed to weaken the bearish case. A stronger sign of bearish invalidation would be a move above the weekly chart resistance at $9,533.
Bitcoin's repeated defense of key support may yield a minor bounce, however, the bias will remain bearish as long as prices are held below resistance near $9,100.
The top cryptocurrency by market capitalization fell more than 10 percent on Tuesday, confirming a bullish-to-bearish trend change and opening the doors for a deeper slide to $7,500.
So far, however, dips below the crucial 200-day moving average (MA) line have been short-lived. BTC is currently trading around $8,440 on Bitstamp, having found takers below the long-term average at $8,332 earlier today.
The cryptocurrency printed a low of $7,998 on Tuesday but closed (UTC) above the 200-day MA, then located at $8,288. Similar price action was seen on Wednesday with sellers failing to secure a close below the long-term support.
Bitcoin resistance could entice bargain hunters. After all, the MA is widely considered a barometer of a long-term trend. The cryptocurrency is set to be in a bull market if its charting higher lows above the 200-day MA, while lower lows below the MA represent bearish conditions.
While a corrective bounce could be seen in the next 24 hours or so, the bearish outlook would be invalidated only if prices find acceptance above $9,097 (May 30 high).
Bitcoin's 14-day relative strength index (RSI) is reporting oversold conditions with a below-50 reading.
Note that overbought/oversold indicators gain credence only when the price is showing signs of buyer/seller exhaustion.
The cryptocurrency is defending the 200-day MA for the third straight day, a sign of temporary seller exhaustion. Hence, an oversold bounce to highs above $8,700 cannot be ruled out.
The bounce, however, could be short-lived, as the MACD histogram continues to produce deeper bars below the zero line, meaning the bearish momentum is still quite strong. Further, the 50- and 100-day MAs have produced a bearish crossover.
Tuesday's drop below the higher low of $9,097 created on May 30 confirmed the transition from the bullish higher lows, higher highs setup to bearish lower highs, lower lows setup.
Hence, the bias will remain bearish and the cryptocurrency will remain on the hunt for a drop below $8,000 as long as prices are trading below $9,097.
As of writing, bitcoin's weekly chart is reporting a double-top bearish reversal pattern.
The cryptocurrency is currently trading well below the double top neckline of $9,533 and loss set to end the week (Sunday, UTC) below that level, as the relative strength index has turned bearish below 50 for the first time since the end of March.
The MACD histogram is also reporting bearish conditions with a below-zero print.
The double top breakout, a bearish reversal pattern, would be invalidated if prices rise back above $9,533.
Disclosure: The author holds no cryptocurrency assets at the time of writing.
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