- Bitcoin’s price has briefly dropped to $7,000 – its lowest level since May.
- Next losses may extend to falling channel support at $6,800, with a weekly chart indicator reporting the strongest bearish bias since March.
- Intraday charts are reporting oversold conditions. As a result, consolidation or a minor bounce to $7,500 could be seen before a deeper drop.
- A break above $8,231 is needed to invalidate lower highs setup and confirm a short-term bullish reversal. The outlook as per the weekly chart would turn bullish once the RSI has moved above 53.00.
Bitcoin’s price dropped to a six-month low on Friday, with a widely tracked technical indicator reporting the strongest bearish bias in eight months.
The number one cryptocurrency by market value fell to $7,009 on Bitstamp at 10:05 UTC – the lowest level since May 17 – erasing the entire rally from $7,293 to $10,350 in October, plus some.
At press time, BTC has bounced back slightly and is trading at $7,220, down 8 percent on a 24-hour basis.
The downtrend looks sustainable, as the weekly relative strength index (RSI) – an indicator used to confirm market trends and overbought and oversold conditions – has declined to 43.00, the lowest reading since mid-March. A reading below 50 indicates bearish conditions. So, it seems safe to say the market sentiment is extremely bearish.
Weekly chart
The RSI is holding well below 50 and pointing south (above left), confirming the bearish trend in the market. The MACD histogram is also printing deeper bars below the zero line, indicating a strengthening of bearish momentum.
The cryptocurrency is trapped in a falling channel (above right), represented by the trendlines connecting June and August highs and July and September lows.
As a result, a further drop to the channel support at $6,800 cannot be ruled out. That said, a minor bounce to $7,700–$7,800 may be seen first, according to the intraday charts.
Hourly and 4-hour chart
The RSI on the hourly chart is producing higher lows as opposed to lower lows on the price chart – bullish divergence suggesting sellers may be running out of steam. The RSI on the 4-hour chart is hovering well below 30, indicating oversold conditions.
8-hour chart
The series of lower highs and lower lows seen above indicates the bears are in control. The immediate outlook would turn bullish only if and when prices invalidate the lower highs setup with a move above $8,231.
Overall, the outlook as per the weekly chart will remain bearish as long as the RSI is held below 53.00 and the price is trapped in a falling channel.
Note that as per textbook rules, RSI’s move above 50 implies a bullish reversal. In this case, however, 53.00 is the demarcation line between the bulls and the bears.
This is due to the fact that the indicator consistently bounced up from 53.00 levels throughout the 2016-17 bull market. That level was breached in early January 2018 following which BTC fell to $6,000 on Feb. 6.
Author: David Palmer
Read more at: https://www.coindesk.com/bitcoin-price-dips-to-six-month-low-of-7000
