Bitcoin is gaining traction on its selloff as price broke below the neckline of its head and shoulders pattern on the daily time frame. Price could be in for a pullback before heading further south as oscillators reflect oversold conditions.
RSI is already starting to turn higher to signal that buyers might be ready to take over while sellers take a break. Stochastic is also pulling up and the price could follow suit as bullish pressure returns. This could be enough to take bitcoin up for a retest of the broken neckline support around $8,000 where more sellers could be waiting.
This area is also near the 100 SMA dynamic inflection point, which could add to its strength as resistance. This moving average is below the 200 SMA to confirm that the path of least resistance is to the downside or that the selloff is more likely to gain traction than to reverse.
Note that the head and shoulders pattern spans around $5,000 in height so the resulting selloff could be of the same height, taking bitcoin down to the $3,000 level if the downtrend persists.
News of a crackdown in China was seen as the main catalyst for the recent slide as this erased some of the optimism from earlier on when the government expressed interest in blockchain technology. Recall that tighter regulation and speculations of a bitcoin ban a few years back were enough to spur prolonged losses among cryptocurrencies then.
It doesn’t help that traders are also wary of tighter oversight in the US as officials have talked against the altcoin during the Facebook Libra hearings. On the bright side, bitcoin has yet to undergo the halving of mining rewards next year, and this is seen to bring longer-term gains for the altcoin, as well as stronger volumes.
Images courtesy of TradingView
