Bitcoin broke below support at a short-term rising trend line, suggesting that a reversal from the uptrend is due. Applying the Fibonacci extension tool shows the next potential downside targets.
The 38.2% level is around $6,200 while the 50% level is just above the $6,000 handle. Stronger selling pressure could take bitcoin down to the 61.8% extension at $5,950 or the 78.6% level close to the swing low. The full extension is located at $5,525.42.
The 100 SMA is below the 200 SMA to indicate that the path of least resistance is to the downside or that the selloff is more likely to pick up than to reverse. Then again, the gap between the moving averages is narrowing to suggest weakening selling pressure and a potential bullish crossover. The 100 SMA is still holding as dynamic resistance for now and could continue to keep gains in check.
Volume remains notably weak, which suggests that investors are likely focused on other assets instead of trading cryptocurrencies. Stochastic is indicating overbought conditions or exhaustion among buyers so a return in selling pressure could follow as soon as the oscillator turns south. ADX is below 25 to suggest that consolidation could carry on, though.
Bitcoin has had quite a volatile run as it initially gained on risk-off flows but soon started tracking higher-yielding and riskier assets like stocks and commodities. For now, traders appear to be waiting for bigger market catalysts before taking the altcoin in a particular direction.
Worsening reports on the coronavirus outbreak could usher in another round of risk-off flows, which might be bearish for bitcoin this time, at least based on the latest price action. Stimulus efforts from governments appear to be calming markets for the time being, which could also keep bitcoin supported in the near-term.
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