- Bitcoin continues to lose altitude and risks falling to crucial support near $7,555.
- A UTC close below that level would invalidate an inverse head-and-shoulders breakout confirmed on Jan. 6.
- However, the pullback was based on low volumes and could be reversed.
- A move above $8,000 would imply an end of the price pullback and open the doors for a re-test of the recent high of $8,463.
Bitcoin is flashing red for the third straight day, with a major portion of the recent price gains now erased.
After a drop back to below $7,800, the cryptocurrency has erased nearly 45 percent of the rise from $6,850 to $8,463 witnessed in the six days to Jan. 8, according to CoinDesk's Bitcoin Price Index.
At press time, the biggest cryptocurrency by market value is currently changing hands near $7,757, representing a 1.5 percent drop from the day's opening price (UTC) of $7,875. Bitcoin shed 1.4 percent and 2.9 percent on Wednesday and Thursday, respectively.
The cryptocurrency did show signs of life with a move higher from $7,780 to $8,000 during the early U.S. trading hours on Thursday. However, the bulls lost momentum near the $8,000 psychological resistance and the minor bounce was quickly reversed.
The rejection likely invited stronger selling pressure, yielding a drop to a low of $7,676 earlier today.
Looking forward, a deeper drop to key support below $7,600 cannot be ruled out.
Bitcoin has dived out of an ascending trendline on the hourly chart, violating the bullish higher -lows pattern.
Further, it has found acceptance under the widely-tracked 100-hour average, with the relative strength index (RSI) reporting bearish conditions below 50.
Bitcoin created a spinning top candle on Wednesday, signaling indecision in the market place.
That ended with bears coming out victorious, as indicated by Thursday's 2.9 percent drop.
Put simply, the odds of a slide to $7,555 – a former hurdle-turned-support of the inverse head-and-shoulders neckline – have increased over the last 24 hours.
The breakout, however, would be invalidated only if BTC prints a UTC close above $7,555.
As seen on the four-hour chart, selling volumes, as represented by the red bars, have dropped throughout the pullback from $8,463 to $7,700.
A low-volume pullback is often short-lived. Hence, the bears need to observe caution despite signs of weakness in the hourly and daily charts.
A move above $8,000, a level that acted as a strong hurdle on Thursday, will imply an end of the pullback and will likely yield a re-test of recent highs above $8,400.
Disclosure: The author does not currently hold any digital assets.
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