The June 2018 low of $5,780 is proving a tough nut to crack, as expected. BTC has failed to close above that level for three days in a row, indicating a price pullback may be needed to fuel a sustained move to $6,000.
BTC looks to be creating a double-top bearish reversal pattern with neckline support at $5,510 on the 4-hour chart. A break lower could yield re-test of the 30-day MA, currently at $5,294.
A strong bounce from the 30-day MA could fuel a sustained rise to $6,000. That looks likely as the long-duration charts are biased bullish.
A UTC close below the 30-day MA would shift risk in favor of a deeper drop below $5,000.
Bitcoin (BTC) could be in for a price pullback, having faced rejection at key price hurdle for three consecutive days.
The cryptocurrency market leader jumped above the April 23 high of $5,627 on Friday, bolstering both the short- and long-term technical setups.
However, despite the odds stacked in favor of a quick rally toward $6,000, the cryptocurrency failed to find acceptance above the June 2018 bottom of $5,780 over the weekend, according to Bitstamp data.
For instance, BTC clocked highs of $5,796 and $5,846 on Friday and Saturday, respectively, but closed below $5,780 on both days. Similar price action unfolded on Sunday, with BTC hitting a high of $5,782 before ending the day at $5,709.
It is worth noting that $5,780 was expected to offer stiff resistance. The level is important because BTC’s sell-off from May 2018 highs near $10,000 run out of steam at $5,780 on June 24. Subsequently, a bounce from that level was followed by an over 40 percent price rise to $8,500 by July 24.
Bitcoin’s recent failures to cross that threshold suggest a pullback and a bounce from the historically strong support level may be needed to recharge the engines for a sustained rise to $6,000.
The case for a price pullback would further strengthen if President Trump’s re-escalation of US-China trade tensions and the resulting slide in equities ends up sending gold higher. This is because the inverse relationship between BTC and gold has recently been its strongest in over 12 months.
So far, however, gold has barely benefited from the flight to safety. The safe haven asset is currently trading at $1,283 per ounce, representing a mere 0.17 percent gain on the day. That’s opposed to futures on the Dow Jones Industrial Average, which is down close to 500 points at press time.
As of writing, BTC is changing hands at $$5,617 on Bitstamp – a 1.48 percent drop on a 24-hour basis.
BTC is currently reporting losses below the former resistance-turned-support of $5,627 (April 23 high), having failed to close (UTC) above the June 2018 bottom of $5,780 for the third straight day on Sunday.
The relative strength index (RSI), which had invalidated a bearish divergence with a move above the falling trendline on Friday, has ended up creating another bearish lower high as opposed to higher high on price.
As a result, a pullback to the historically strong 30-day moving average (MA) support, currently at $5,294, cannot be ruled out.
BTC seems to be creating a double-top pattern with a neckline at $5,510 on the 4-hour chart. A break below that level would create room for a drop to levels below $5,200 (target as per the measured move method).
A drop below $5,510 may happen in the next 24 hours or so, as the repeated failure to find acceptance above $5,870 has been accompanied by the bearish divergence on the RSI.
Bitcoin closed last week above the 50-week moving average (MA), further strengthening the evidence for a long-term bullish reversal.
The weekly chart RSI is also biased bullish, having convincingly scaled the resistance band of 53.00–55.00 last month.
The 5- and 10-week MAs are trending north, also indicating a bullish setup. Notably, both MAs are located at $5,386, so that level could work as strong support this week.
With the long-term chart looking bullish, a pullback to the 30-day MA or lower could be short-lived. A strong bounce from that average would likely yield a rally to $6,000.
That said, the prospects of a deeper slide below $5,000 would improve if prices see back-to-back daily closes below the 30-day MA.
Disclosure: The author holds no cryptocurrency assets at the time of writing.
Bitcoin image via Shutterstock; charts by Trading View