Bitcoin (BTC) is trading on the defensive today, having dropped 16 percent over the last three days.
As of writing, BTC is changing hands at $7,270 on Bitfinex, down 6.5 percent in the last 24 hours, and could extend the slide further to $7,000 in the next 24 hours.
The cryptocurrency closed (as per UTC) at $7,494 yesterday – its lowest daily close since April 12 – and looked oversold as per the relative strength index (RSI) in the hourly and 4-hour chart.
A resulting corrective rally ran info offers above $7,700 earlier today and prices fell to a 6-week low of $7,352 at 08:30 UTC. The failure on the part of the bulls to produce a notable corrective rally despite oversold conditions indicates that bearish sentiment is currently strong.
The downside break of the bear flag, a bearish continuation pattern, indicates the minor corrective rally from the low of $7,402 has ended and BTC could drop to $7,000 (target as per the measured height method).
The 50-hour, 100-hour and 200-hour moving averages (MAs) are biased to the bears. Meanwhile, the relative strength index (RSI) has dropped close to the oversold region (30.00), but is holding well above the lows seen yesterday, indicating there is enough room for a drop to $7,000.
BTC closed (as per UTC) yesterday below $7,787 (61.8 percent Fibonacci retracement) in a convincing manner, signaling a bullish-to-bearish trend change. Note that a break below the 61.8 percent Fib is widely considered a final confirmation of a bearish trend reversal.
The chart also shows a bearish downside break of the falling channel, while the 5-day and 10-day MAs are trending south, also in favor of the bears.
The relative strength index is holding below 50.00 – well above 30.00 (oversold zone), signaling scope for further losses.
- BTC will likely find acceptance below the immediate support seen at $7,188 (78.6 percent Fibonacci retracement seen in the daily chart) and drop to the $7,000 mark in the next 24 hours.
- By then, the RSI in the hourly and 4-hour chart will likely have dropped below 30.00, indicating oversold conditions, meaning BTC may defend the psychological support level of $7,000.
- On the higher side, only a daily close above the 10-day MA, currently seen at $8,111, would abort the bearish view.
- Only a daily close above $8,644 (May 21 high) would signal a bearish-to-bullish trend change.
Chart image via Shutterstock