Bitcoin’s 15-percent recovery from the 14-month low hit yesterday may have opened the doors for short-term price consolidation.
The leading cryptocurrency by market value dropped through the support of the trendline connecting the August 2015 and August 2016 lows and fell to $3,474 yesterday – the lowest level since Sept. 17, 2017 (prices as per Bitstamp). At that level, BTC was down 38 percent from the highs above $6,300 seen two weeks ago.
The drop was short-lived, however, and prices closed yesterday (as per UTC) at $3,939 – well above the trendline – validating the oversold conditions reported by the technical indicators. As a result, a bout of consolidation could be in the offing.
At press time, BTC is changing hands at $3,920 on Bitstamp, having clocked a high of $4,069 earlier today.
The 15 percent recovery, though, may turn out to be a “dead cat bounce” if the long-term trendline support, currently at $3,830 is again breached. Meanwhile, the prospects of a stronger corrective rally would improve if prices find acceptance above $4,000.
The bullish divergence of the relative strength index (RSI) and the falling channel breakout in the 4-hour chart indicate a bearish-to-bullish trend change. As a result, a stronger recovery rally toward $4,461 (downward sloping 50-candle EMA) cannot be ruled out.
Gains above that level may remain elusive as the stacking order of the 50-candle EMA below the 100-candle EMA, below the 200-candle EMA indicates the path of least resistance is on the downside.
Over on the daily chart, the RSI has created a bullish divergence (higher low). That pattern would gain credence if the RSI moves above 30.00 into the undersold territory.
The primary trend, however, would remain bearish as long as both the 5- and 10-day EMAs are sloping downwards…