Bitcoin (BTC) has finally reversed from its uptrend, after a long period of gains within an ascending triangle. Yesterday the leading crypto was rejected, after a false breakout at the $5,350 area. The move invalidated the ascending triangle, a bullish pattern, and has left nowhere to go but down.
This failed breakout of the triangle is by no means surprising, as Bitcoin was consistently overbought on the indicators. And after such a fantastic runup, a correction should be welcomed as healthy, and needed to build support is there is to be another leg higher into $6k territory.
The critical level to watch now is $5,000-4,900. Two indicators define this first level of defense for the retrace: The 4-hour 55 exponential moving average (EMA), and the 0.38 Fibonacci retracement level.
The $4.9 level is also noteworthy because it represents the breakout’s initial support level, back on April 3. This is precisely where the initial daily candle closed, confirming some confidence in a new uptrend.
A deeper retracement would not be surprising, however, nor disastrous. A fall to anywhere above $4,600 would land above the important 200 day moving average; and would also be a retracement above the 0.68 Fibonacci level, falling below which would signal a rather deep correction and perhaps a lengthy stay below $5k.
The price action on a granular scale looks like nothing but a series of bear flags. No bullish indicators are yet visible on a small scale (15 minute chart show), with a falling RSI along with falling price (blue circles, below). Based on this indicator, another leg down looks more likely than not.
Looking at the daily RSI, we can see that the dramatically overbought price action has cooled off; but there is still plenty of conceivable downside to go before the retrace settles. Holding the (indicated) RSI level of 65 seems unlikely, and doing so would be extremely impressive - which, as we have seen of late, is not outside the realm of Bitcoin’s possibilities.
(The views and opinions expressed here do not reflect that of CryptoGlobe.com and do not constitute financial advice. Always do your own research.)