Bitcoin is painting a less bullish picture than 24 hours ago, following a drop out of an ascending price channel.
Stepping back, the leading cryptocurrency picked up a strong bid at $6,200 on Oct. 31, keeping the crucial 21-month EMA support intact. Further, it witnessed a symmetrical triangle breakout earlier this week, suggesting that bulls had come out victorious in a tug of war with the bears.
The breakout had looked legitimate as the technical indicators turned increasingly bullish. In particular, the relative strength index rose to a three-month high of 59.00 yesterday, signaling strong bullish conditions.
As a result, BTC was expected to remain well bid above $6,500 and looked likely to rise to $6,800 in the near-term.
Instead, it fell back to $6,450 on Coinbase earlier today, invalidating the bullish higher lows and higher highs pattern, as seen in the chart below.
The rising channel seen in the hourly chart has been breached to the downside, meaning the recovery rally from the Oct. 31 low of $6,201 likely ended at a high of $6,540 reached yesterday.
The stacking order of the 50-hour exponential moving average (EMA) above the 100-hour EMA, above the 200-hour EMA indicates the path of least resistance is still on the higher side. That bullish signal could soon weaken, though, as moving averages are lagging indicators.
While the channel breakdown has opened the doors for a deeper drop to $6,372 (horizontal support line), a bearish reversal would be confirmed only if BTC drops below 6,200 (Oct. 31 low).
Over on the daily chart, BTC bears may feel emboldened if prices drop below $6,200, negating the higher low pattern. That scenario seems unlikely with bitcoin's current lack of volatility, however.
Investors should keep an eye out for a strong bounce from the ascending (bullish) 10-day EMA, as that could recharge the engines for a rally to $6,800.
- The immediate bullish outlook has been neutralized, courtesy of a rising channel breakdown on the hourly chart.
- BTC may experience a deeper drop to the hourly chart support of $6,372. A violation there would expose the recent low of $6,200.
- Wednesday's high of $6,540 is the level to beat for the bulls. A break above that level, if confirmed, could yield a rally to $6,800 (October high).
Disclosure: The author holds no cryptocurrency assets at the time of writing.
Bitcoin image via CoinDesk archives; Charts by Trading View