Bitcoin has formed lower highs and lower lows to create a descending channel on its 1-hour time frame. Price is down to support and could be due for a pullback to the resistance again.
Applying the Fibonacci retracement tool on the latest swing low and high shows that the 50% level lines up with the mid-channel area of interest where sellers might be waiting. A larger pullback could last until the 61.8% Fib at $9,920 or the top of the channel closer to $10,200. Price is currently testing the 38.2% level and, if any of the Fib levels hold as resistance, bitcoin could dip back to the swing low at $9,289 next.
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 gain traction than to reverse. The 100 SMA is also close to the middle of the channel, adding to its strength as a ceiling.
RSI is still heading north, so price could follow suit while buyers have the upper hand. Stochastic is also heading higher to signal the presence of bullish momentum, but this oscillator is already approaching the overbought region. In that case, buyers could use a break soon and allow sellers to take over.
Bitcoin suffered a sharp selloff as most traders likely picked up on the short-term trend reversal signal in the past few days. Also, receding coronavirus concerns are also allowing risk appetite to return to the markets, drawing traders back to stocks and commodities while luring them away from cryptocurrencies.
The selling was likely exacerbated by the fact that it was bitcoin’s sharpest fall in three months, leading many to believe that a bigger correction is due. Then again, this could be taken by bulls as a chance to hop in at bargain levels ahead of the halving of mining rewards in May.
Images courtesy of TradingView
