Bitcoin Eyes First Test of $7.2K Price Support Since April

Bitcoin rolling

A high-volume range breakdown seen on the daily chart suggests scope for test of a long-term moving average at $7,200. A violation there would expose another major average support at $7,000.
A corrective bounce above resistance at $7,534 could be seen before a deeper drop, as the intraday charts are reporting oversold conditions.
A lagging indicator suggests BTC may bottom out in the range of $7,000 to $7,200.
A UTC close above the Oct. 21 high of $8,352 is needed to confirm a bullish reversal.
Long-term bitcoin price support at $7,200 may be put to test for the first time in six months, likely after a minor price bounce.
The crypto market leader fell by $500 to $7,500 during the U.S. trading hours on Wednesday, confirming a downside break of the recent trading range of $7,800 to $8,400.
Prices went on to hit a five-month low of $7,293 before printing a UTC close at $7,470 – down 6.92 percent on the day, according to Bitstamp data. That’s the biggest single-day drop since Sept. 24, when prices had declined by 11.83%.

Related: Market Wrap: Ether Up 50% in 2020, Hits $200 on Sunday
The range breakdown indicates the sell-off from highs above $10,000 seen on Sept. 23 has resumed and prices could test support at $7,200 – the 100-period moving average on the three-day chart. That MA line was last put to test at the end of April.
The drop to the key support, however, may be preceded by a minor corrective bounce, as the intraday chart indicators are reporting oversold conditions.
As of writing, BTC is changing hands at $7,470 on Bitstamp, representing a 46 percent loss from 2019’s high of $13,880 registered on June 26.  That said, the cryptocurrency is still reporting a 100 percent gain on a year-to-date basis and is the best performing asset of 2019.

Daily and 3-day charts

Related: Bitcoin Hits Highest Level Since Black Thursday Amid Halving Buzz
Wednesday’s range breakdown (above left) is backed by an uptick in trading volumes to the highest level since Sept. 26 and looks to have legs.
The 14-day relative strength index (RSI) has dived below the ascending trendline, invalidating the bullish divergence confirmed on Oct. 6. A failed bullish divergence is widely considered as a powerful bearish signal.

As a result, the cryptocurrency appears on track to test the three-day chart 100-candle MA at $7,200 (above right). A violation there would expose the 200-candle MA, currently located just below $7,000.
The sell-off may stall around the aforementioned crucial support levels, as the 50- and 200-day moving averages (MAs) are about to produce a death cross – a bearish, but a lagging indicator, which trapped sellers on the wrong side of the market in April 2018 and September 2015.
Hourly and 4-hour charts

The RSIs on the hourly and 4-hour charts are reporting oversold conditions with a below-30 print. So, a corrective bounce cannot be ruled out.

The former support-turned-resistance of $7,714 (Sept. 30 low) could come into play if the immediate resistance at $7,534 (horizontal line on hourly) is scaled in the next 24 hours.
The outlook would turn bullish if and when prices rise above the Oct. 20 high of $8,352, invalidating the bearish lower highs setup on the daily chart.
Disclosure: The author holds no cryptocurrency assets at the time of writing.
Bitcoin image via CoinDesk archives; charts by Trading View

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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