Bitcoin (BTC) could revisit the psychological support of $7,000 as the recent rally is showing signs of exhaustion, according to technical studies.
At press time, the cryptocurrency is changing hands at $7,235 on Bitfinex – representing a 0.4 percent drop on a 24-hour basis.
Prices found acceptance above $7,000 over the weekend, having cleared the resistance offered by the 50-day and 100-day moving averages (MAs) last week and rose to $7,429 yesterday – the highest level since Aug. 4.
So, it seems safe to say that the bull grip around BTC strengthened in the last seven days. Still, prices failed to cut through the resistance of the trendline sloping upwards from the June 29 low and Aug. 12 low, possibly due to bullish exhaustion. This should not come as a surprise as BTC has rallied nearly 27 percent in the 2.5 weeks without notable price pullback.
As a result, BTC could feel the pull of gravity in the next 24 hours, although overall outlook remains bullish as long as prices do not find acceptance below $7,000.
As seen in the above chart, BTC created a gravestone doji candle yesterday, signaling the upside momentum has likely weakened, that is, bulls attempted to push prices above the trendline hurdle and failed and the bears regained lost ground.
Further, the relative strength index (RSI) rolling over from above 80.00 (overbought territory) is calling for profit taking or healthy pullback.
Hence, prices could drop to rising wedge support, currently seen at $7,040, but reckon the support would hold as the chart shows the 100-candle MA has crossed the 200-candle MA from below (bull cross).
The stacking order of the 50-candle, above the 100-candle, above the 200-candle, is a typical bullish signal.
The 5-day and 10-day MAs continue to trend north, indicating a short-term bullish setup. What’s more, the chart shows a bullish crossover between the 50-day and 100-day MAs and the RSI is biased toward the bulls.
Still, if bitcoin suffers a downside break of the rising wedge, then the bears could feel emboldened and a deeper sell-off could ensue.
- BTC could be in for a minor pullback to $7,040–$7,000 in the next 24 hours.
- The overall bias remains bullish, as seen in the daily chart, hence, BTC will likely defend the support at $7,000 and could resume the journey back towards $7,500.
- A downside break of the rising wedge would signal a bear revival and shift risk in favor of a drop to support at $6,650 (multiple daily highs).
Disclosure: The author holds no cryptocurrency assets at the time of writing.
Bitcoin image via Shutterstock; Charts by Trading View
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