After failing to breach $6,000, bitcoin prices have again taken a downturn.
At press time, the bitcoin-U.S. dollar (BTC/USD) exchange rate is $5,850, but of greater interest to traders is what this means for the ongoing rally, which has pushed bitcoin up from an Oct. 25 low of $5,376.
Prices on the CoinDesk Bitcoin Price Index (BPI) have twice neared the $6,000 mark in the last 24 hours, yet both attempts have stalled.
The first attempt ran out of steam at $5,978 yesterday at 13:00 UTC, while a second fell apart at 01:00 UTC today.
As of writing, the BPI is down 0.90 percent at $5,834.
While the reasons for the exhaustion are unknown, it may simply be the case of the formation of a new psychological level, with traders unsure of whether higher prices above $6,000 will hold.
Whatever the reason, the price action analysis calls for vigilance.
The above chart shows:
- Bearish price-money flow index (MFI) divergence, indicating the rally ended with the Oct. 21 record highs above $6,100.
- Bearish 5-day moving average (MA) and 10-day MA crossover (i.e. 5-day MA cuts 10-day MA from above).
Exhaustion near $6,000 adds credence to the bearish price-MFI divergence and indicates potential for a drop below the 5-day MA of $5,786.
A break below $5,786 would validate the bearish 5-day MA and 10-day MA crossover and could open doors for a drop to head-and-shoulders neckline (red line) support of $5,440.
The rising trend line (blue dotted line) is also likely to offer support around $5,440 levels.
As per CoinMarketCap, total bitcoin trading volume dropped 28 percent on Thursday, and decreased by another 3 percent today.
This further suggests the rally from $5,376 lacked substance (weak volumes), thus the exhaustion near $6,000 is perhaps to be expected.
Looking ahead to today:
- The odds of a break below $5,786 and a drop to $5,440 levels are high.
- On the higher side, only a convincing move above $6,000 would open doors for new record highs above $6,200.
Tired runner image via Shutterstock
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Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.
Published at Fri, 27 Oct 2017 11:45:39 +0000