Yesterday, it was looking like Bitcoin (BTC) would break its local top and have another leg up to at least $7,700. But shortly after we made this observation, there was an abrupt breakout-fakeout, with a would-be breakout instantly sold off and canceling the move out. Now, Bitcoin is going sideways and looking shaky – and is getting itself set up for a nasty drop if this keeps up.
Starting on the 2-hour chart, we see the fakeout manifested on the histogram with an erratic ghost bar, and on the RSI with a fall back below the trendline that was just being cracked. A second rejection came at that trendline a few hours ago, and Bitcoin here is not looking strong enough to take this position at the red bar.
Moving back from here to the 4-hour chart, we see a major risk developing for Bitcoin. If it cannot take this resistance zone soon, what we will see is a double top formation with a series of bear divergences on the RSI.
This is likely going to signal a leg down for Bitcoin, putting paid to the LTF uptrend we have seen since The Big Drop a couple of weeks ago. In that case, we would likely see those lows revisited.
On the daily, we see the scope of that scenario should it come. The RSI never looked like a bottom before, as important bottoms rarely come in the V-shape variety. Far more comfortable would be another test of those lows – anywhere under $5k will do – accompanied by a bull divergence on the RSI.
Price closed just under the 21 EMA yesterday, forming a textbook bearish spinning top candle. We also see the histogram really starting to roll over today, and the bearish EMA expansion continuing.
All in all, the LTF uptrend looks finished and ready to turn back down. This was always very likely, with the MTF downtrend unlikely to be challenged in such an austere market context. Sweeping the lows and putting in a more robust bottom will be no bad thing.
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