- Bitcoin has made a recovery after falling to a recent low near $8,500 overnight.
- Short duration charts are calling for an extension of an ongoing corrective bounce to $9,000.
- A move above key resistance at $9,430 is needed to weaken bearish pressure.
Back then, bitcoin was starting a rally toward a multi-month high of $10,500 on Feb. 13. Now, however, the picture has become more bleak.
Bitcoin lost its upward trajectory on Feb. 19 when prices fell by 5.8 percent, violating the bullish trendline rising from Jan.3 and Jan. 26 lows. The downside move gathered pace after bull failure to defend $9,400 on Monday activated a bearish head-and-shoulders pattern on technical charts.
The $1,500 sell-off seen in the last three days has violated the short-term bullish trend and exposed deeper support levels. However, signs of seller exhaustion seen on the intraday charts suggest scope for an extension of the ongoing recovery rally.
The previous four-hour candle closed on a positive note, suggesting a weakening of downside momentum. That is backed by the long ntail attached to the preceding hammer candle.
A below-30 reading on the RSI indicates bitcoin is oversold, an indicator that's has also gained credence with the hammer candle.
As a result, bitcoin could soon challenge the psychological hurdle of $9,000. A break higher would shift the focus to the descending trendline resistance, currently at $9,275.
The case for a corrective bounce would weaken if a 4-hour candle closes below $8,520 – the low of the hammer candle shown above. That would imply a continuation of the bearish move.
Bitcoin closed (UTC) well below the Feb. 4 low of $9,075 on Wednesday, invalidating the bullish higher-lows set-up and putting the bears into the driver’s seat.
The five- and 10-day averages are trending south, indicating a strong downside momentum. Here, there are no signs yet of oversold conditions: the RSI is hovering in bearish territory below 50 and suggesting scope for a further drop.
Put simply, the daily chart is aligned in favor of a drop to $8,280 (100-day average) and $8,213 (Jan. 24 low).
The bias will remain bearish as long as prices are trading under the former support-turned-resistance of the head-and-shoulders neckline, currently at $9,430.
Disclosure: The author holds no cryptocurrency at the time of writing.
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