Bitcoin is testing the bottom of its descending channel seen on the 4-hour time frame and looks due for a bounce. However, this might merely spur a correction to the area of interest that lines up with the channel top around $6,200.
Applying the Fibonacci retracement tool shows that the 61.8% level is closest to this resistance, which is also near the dynamic resistance at the moving averages. The 100 SMA is below the longer-term 200 SMA to signal that the path of least resistance is to the downside or that the selloff is more likely to resume than to reverse. In addition, the gap between the moving averages is widening to signal strengthening selling pressure.
It’s also worth pointing out that the current consolidation looks like a bearish flag, which is considered a continuation signal. A break below the spike lower to the $5,200 area could be enough to confirm that another leg lower is in the works, likely lasting by the same height as the flag mast.
Stochastic is pointing down to confirm that sellers are returning. The oscillator looks ready to turn lower without even hitting the overbought zone, indicating that bears are eager to return.
Cryptocurrencies had a rough time last week as the prevailing uncertainty on the Bitcoin Cash hard fork spilled over to the entire industry. After all, investors were reminded that similar issues might arise for other altcoins at some point, leading to potentially larger losses in value.
Some say that the recent slide puts bitcoin out of track for a rebound this year as it might take months to unwind those losses. Still, a handful of analysts are maintaining positive forecasts as the dips are opportunities for more buyers to rush in. Besides, institutional investments are expected to flow in early next year and most market players wouldn’t want to be left behind.
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