Bitcoin's (BTC) reversal of the recent uptrend in prices is gathering pace and a drop into a bearish territory below $6,200 is now a possibility, technical charts indicate.
The leading cryptocurrency found acceptance below the lower edge of the rising channel yesterday, invalidating the bullish price action witnessed earlier this week. Essentially, the rally from the Oct. 31 low of $6,201 has ended at a high of $6,540 reached on Nov. 7.
At press time, BTC is trading at $6,350 on Coinbase, having clocked a five-day low of $6,335 soon before press time, following a sudden $100 drop.
The negative follow through to yesterday's bullish channel breakdown is an indication that the bears are likely feeling emboldened, having pulled down prices by 2.9 percent from weekly highs.
As a result, the support of the trendline from Oct. 11 lows could be breached in the next few hours, opening the doors for a drop below the recent higher low of $6,200 (Oct. 31).
Hourly chart BTC
As can be seen above, the cryptocurrency has established a bearish lower highs and lower lows pattern, validating yesterday's bullish channel breakdown.
Further, prices seem to have found acceptance under the crucial 200-hour exponential moving average (EMA) support and the major EMAS – 50, 100 and 200 – are beginning to roll over in favor of the bears.
In particular, the 50-hour looks set to cross the 100-hour EMA from above, bolstering the already bearish technical setup.
The drop below the immediate support of $6,330 (61.8 percent Fibonacci retracement), however, is likely to happen after a minor bout of consolidation, as the relative strength index (RSI) is reporting oversold conditions below 30.00.
Over on the daily chart, the symmetrical triangle breakout and a close above the critical 50-day EMA resistance witnessed earlier this week failed to produce significant price gains.
A failed breakout often ends up putting the bears back into the driver's seat. Hence, a slide to $6,200 could be in the offing.
- A combination of the failed breakout on the daily chart and the bearish setup on the hourly chart indicates that cryptocurrency could soon drop below $6,274 (trendline connecting the Oct. 11 low and Oct. 31 low + 76.4 percent Fibonacci retracement support) and drop below $6,200 (Oct. 31 low).
- A UTC close below $6,200 would invalidate the higher lows pattern seen on the daily chart, shifting risk in favor of a drop to the psychological support of $6,000.
- A bullish revival is seen only above the weekly high of $6,540.
Disclosure: The author holds no cryptocurrency assets at the time of writing.