Bitcoin Oversold Within Downtrend; Resistance at $45K

Upside is limited as long-term technical indicators turned negative.

Jan 7, 2022 at 7:15 p.m. UTC
Updated Jan 7, 2022 at 7:41 p.m. UTC

Bitcoin (BTC) remains in a two-month long downtrend, defined by a series of lower price highs.

The cryptocurrency was down about 9% over the past week as upside momentum continued to slow.

There is minor support around $40,000, which could stabilize the current pullback. However, upside appears limited around the $45,000 resistance level. This means buyers could quickly take profits if a price bounce occurs.

The relative strength index (RSI) on the daily chart is the most oversold since Dec.11, albeit within a price downtrend.

Over the long-term, BTC is vulnerable to further selling, especially if buyers fail to hold the $38,000-$40,000 support zone over the weekend. On the weekly chart, the RSI is not yet oversold, which suggests the downtrend remains intact.

Lower support is seen around $28,000, which is near the June 2021 low.

BTC is roughly two weeks away from registering a downside exhaustion signal, which typically precedes a countertrend price bounce. Still, similar oversold readings on the daily chart have been delayed as buyers remain on the sidelines.

DISCLOSURE

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Damanick is a crypto market analyst at CoinDesk where he writes the daily Market Wrap and provides technical analysis. He is a Chartered Market Technician designation holder and member of the CMT Association. Damanick is also a portfolio manager at Cannon Advisors, which does not invest in digital assets. Damanick does not own cryptocurrencies.