Bitcoin’s (BTC) small rally over the last 48 hours has stalled slightly and the price has retreated to the $7,000 area. That is not good news for the bulls, however a clear break below $7,000 would kill the odds of a move higher to $7,800-$8,000, according to technical analysis and market sentiment.
The price of bitcoin hit a high of $7,509 at 19:00 UTC yesterday, according to Bitfinex data, before retreating to $7,050 at time of writing.
The pullback was to be expected after the recent rally, but the price needs to hold above the key $7k level for the bullish sentiment to persist. A break below $7,000 might lead to a confirmation of the head-and-shoulders pattern indicating a bearish reversal. The price would need to close below the neckline (indicated by the purple line in the chart below) at around $6,850 for this bearish pattern to be confirmed.
However, the momentum is still biased to the bulls with the 50-hour moving average (MA) and 100-hour MA climbing, while the 200-hour MA has moved into neutral. So for now, it appears any dip to or below $7,000 will likely be short-lived.
That said, the odds of a corrective rally to $7,800 (channel resistance) and $8,000 (psychological mark) would drop sharply if BTC closes the day below $7,000.
BTC closed yesterday above the key resistance of $7,240, strengthening the case for a corrective rally to $7,800.The 5-day MA has turned higher (adopted bullish bias) in response to the uptick in prices.
If, however, bitcoin closes below $7,000 today, it would add credence to the downward sloping (bearish biased) 10-day MA and signal failure to hold above hold above $7,240. Further, the 5-day MA would adopt a bearish bias, derailing the bottoming out process.
BTC needs to defend the $7,000 level to avoid further losses and remain in a bearish trend.