For bitcoin, the path of least resistance is to the downside.
At press time, the leading cryptocurrency is trading at $6,340 on Bifinex – down 3 percent from the high of $6,550 hit earlier today.
The minor recovery from the previous day’s low of $6,300 was likely a product of oversold conditions reported by the short duration relative strength index (RSI) yesterday.
More importantly, the fact that the gains have been erased quickly indicates the bearish sentiment is quite strong and the minor pop has likely recharged engines for further sell-off.
The technical charts are also biased toward the bears. As a result, a drop to $6,000 (February low) cannot be ruled out.
As seen in the above chart, the last hourly candle confirmed a downside break of the rising wedge-like pattern, signaling an end of the technical recovery.
The major moving averages (MAs) – 50-hour, 100-hour, and 200-hour – are trending south in favor of the bears. More importantly, the RSI is now aligned in a more bear-friendly manner.
BTC suffered a rising wedge breakdown on Wednesday, indicating the rally from the Aug. 14 low of $5,859 has ended and the bears have regained control.
Further, the negative price action yesterday bolstered the bearish setup. Meanwhile, the RSI at 40 is signaling room for a deeper drop in prices.
Investors should also keep an eye on the line chart as the pennant breakdown would boost the odds of BTC ending the week below $6,000.
- BTC could find acceptance below $6,300 (previous day’s low) and may drop further towards the crucial support of $6,000 over the weekend.
- A weekly close below $6,000 would signal a revival of the long-term bear market.
- On the higher side, technical recovery is seen gathering steam above $6,550 (today’s high), although with key intraday MAs trending south, the sustainability of these gains is under question.
Disclosure: The author holds no cryptocurrency assets at the time of writing.
Bitcoin chart image via Shutterstock; Charts by Trading View