Bitcoin (BTC) may see a corrective rally following losses this week, but it’s still too early to call a bottom, the technical charts indicate.
The cryptocurrency has spent a better part of the last 24 hours trading in a roughly sideways manner in the narrow range of $7,900-$8,400, according to CoinDesk’s Bitcoin Price Index (BPI). As of writing, the BPI is seen at $8,152. Meanwhile, the global average price, as calculated by CoinMarketCap, stands at $8,169 – up 0.15 percent in the last 24 hours.
The consolidation may have brought a little to the battered bulls and suggests a temporary low is in place at $7,676. Further, the shorter duration technical charts (prices as per Bitfinex) show potential for a relief rally.
Bitcoin has created a bull flag pattern on the hourly chart – a continuation pattern – meaning an upside break to above $8,370 would signal a continuation of the rally from $7,665 (Wednesday’s low) and open the doors for $9,170 (target as per the measured height method).
The relative strength index (RSI) also shows a bull flag pattern, adding credence to the bullish setup on the price chart.
However, the 50-hour MA (moving average), 100-hour MA, and 200-hour MA are still all bear biased (sloping downwards), so the rally will likely be short-lived.
Further, on the way towards $9,170, BTC will face stiff resistance around $8,710 (bear flag support).
The daily chart also shows that the 5-day MA and 10-day MA are trending lower in favor of the bears. So, the primary trend is bearish.
That said, a close today (as per UTC) above the 10-day MA at $8,964, currently, would mark a positive follow-through to yesterday’s long-tailed doji candle, signaling a short-term bottom is in place at around $7,665.
A corrective rally to $9,000-$9,170 is likely as per the setup on the hourly chart.
A close (as per UTC) above the 10-day MA would signal the sell-off from the recent high of $11,700 has ended, although a sustained rally to $10,000 and above looks likely only after the 10-day MA has bottomed out.
In the larger scheme of things, only a close above $11,700 would invalidate the bearish set up on the weekly chart and signal a bearish-to-bullish trend change.
Bearish scenario: Repeated failure to hold above $8,342 (last Friday’s doji candle low) could yield a sell-off to $7,000. Note that bitcoin has already failed twice in the last 24 hours to keep gains above $8,342.