Bitcoin Most 'Overbought' in 2 Years After Price Rises Back Above $10K
Bitcoin's rally is looking overstretched, according to a technical indicator. A correction may be seen if prices fail to secure a foothold above resistance at $10,350.
![btc chart 2](https://www.coindesk.com/resizer/a60LoNwBQZL8rYOooqoU92bnzdM=/567x333/filters:quality(80):format(jpg)/cloudfront-us-east-1.images.arcpublishing.com/coindesk/75ERJELTDNG3DNKNC7JNX3RBIQ.png)
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- Bitcoin is at its most overbought level since December 2017, according to the three-day chart's money flow index.
- If prices fail to establish a foothold above resistance at $10,350, a correction to $9,800 may be seen.
- The overall trend will remain bullish as long as prices are holding above support below $9,100.
Bitcoin’s recent price rally is looking as overstretched, according to a technical indicator.
The money flow index (MFI), a momentum indicator that incorporates both price and trading volumes, has risen to 86.00 on the three-day chart. That's the highest level since late 2017 when prices hit a life-time high of $20,000. A reading above 80 indicates overbought conditions.
The overbought conditions do not necessarily imply an imminent bearish reversal but likely represent over-exuberant bitcoin buying because the cryptocurrency has rallied by more than $3,500 over the last six weeks.
Also, markets sometimes enter into very strong trends, in which case the MFI can stay overbought for a prolonged period of time.
That said, the latest above-80 reading on the MFI has gained credence with bitcoin’s failure to keep gains above $10,350 (October high) resistance earlier today.
3-day chart
![btc-3day-chart](https://www.coindesk.com/resizer/BuVUo4l-ICCnKovg5-ljjagMd2k=/560x241/filters:quality(80):format(jpg)/cloudfront-us-east-1.images.arcpublishing.com/coindesk/4AMM467BHFBA5CVDSVV5UZ3FE4.png)
The long upper wick on the latest three-day candle represents a failure on the part of the bulls to establish a secure foothold above the horizontal resistance of $10,350 – a sign of buyer exhaustion.
That, along with MFI’s overbought signal, indicates scope for a temporary pullback or consolidation.
Prices may fall back to the five-candle moving average (MA), currently at $9,876, if the bulls fail to engineer a convincing break above $10,350 during the U.S. trading hours.
The overall bias will remain bullish as long as prices are holding above the Feb. 4 high of $9,075, as discussed on Tuesday.
Hourly chart
![hourly-charts](https://www.coindesk.com/resizer/S4XZiWNSbHEV2OiX7HizcECdn1w=/560x242/filters:quality(80):format(jpg)/cloudfront-us-east-1.images.arcpublishing.com/coindesk/HH47GNNCSVBZTOQCTOATNJZS7A.png)
The hourly chart relative strength index has produced lower highs, contradicting higher highs on price. The bearish divergence supports the case for the price pullback put forward by the three-day charts.
Daily chart
![dailies-2](https://www.coindesk.com/resizer/dyYcDLVzfKp7iRJzzGjBhU8lWEo=/560x242/filters:quality(80):format(jpg)/cloudfront-us-east-1.images.arcpublishing.com/coindesk/HB3J4MTL3ZBTHAAY2DTTRX7HEQ.png)
Bitcoin created a bullish engulfing candle on Tuesday, signaling a continuation of the uptrend.
Bullish bias would further strengthen if prices find acceptance above $10,383 (engulfing candle’s high), bringing additional gains toward the next big resistance at $10,949 (September high).
Bitcoin is currently trading at $10,355, representing 5.66 percent gains on a 24-hour basis, according to CoinDesk's Bitcoin Price Index.