Bitcoin is finding support at the bottom of its descending channel on the daily time frame and could be due for a countertrend bounce to the top. Oscillators are showing that bullish pressure could pick up from here.
RSI has already started to pull up from the oversold region to signal that buyers are returning. The oscillator has plenty of room to climb before reflecting overbought conditions, so bullish momentum could stay on longer. Stochastic is also turning higher to show that buyers are taking over while sellers take a break.
However, the 100 SMA is below the longer-term 200 SMA to indicate that the path of least resistance is to the downside. In other words, the downtrend is more likely to resume than to reverse or resistance is more likely to hold than to break.
The 100 SMA also lines up with the 50% Fibonacci retracement level to add to its strength as resistance around $8,400. The 200 SMA is closer to the channel top at $9,000 while the 38.2% level is in line with the mid-channel area of interest.
Bitcoin has tumbled on news that the Chinese government is stepping up its efforts to crack down on cryptocurrencies, reversing the sentiment from previous reports that officials are warming up to blockchain technology.
It doesn’t help that traders are already wary of potentially tighter oversight in the US as officials have previously raised plenty of concerns about bitcoin and other cryptocurrencies during the Congress hearings on Facebook’s Libra. Market watchers have also been growing tired of the lack of momentum and volumes in the recent rallies, spurring profit-taking activity, which could strengthen leading up to the Thanksgiving holidays.
Still, there is a lot to look forward to for next year, including the halving of mining rewards that could lead to longer-term gains.
Images courtesy of TradingView
