Bitcoin bulls need to defend key support at $6,905 to avoid invalidation of the short-term bullish outlook, technical charts suggest.
Having hit a peak of $7,139 Wednesday, the leading cryptocurrency is currently trading around $6,920 on Bitfinex – down 2 percent on a 24-hour basis.
The drop does not come as a surprise, however, as the 21 percent rally witnessed in the last two weeks was looking overstretched yesterday.
More notably, the short-term bull case would weaken if BTC finds acceptance below the 100-day moving average (MA) of $6,905.
BTC created a “spinning top” candle yesterday, which, when viewed against the backdrop of the 21 percent rally from the low of $8,507, likely represents bullish exhaustion.
Looking ahead, a UTC close below the 100-day MA lined up at $6,905 would validate the spinning top candle and shift risk in favor of a downside break of the rising wedge.
Acceptance below the wedge support would confirm a bullish-to-bearish trend change, that is, the rally from the low of $5,859 has ended and the bigger downtrend from the July high of $8,507 has resumed. In this case, BTC could revisit recent lows below $6,000.
Hence, the bulls need to defend the 100-day MA of $6,905 to keep the short-term bullish outlook intact. That may be a tough call, though, as the short duration charts are pointing to an increased risk of further losses.
As seen in the above chart, BTC has breached the rising trendline in favor of the bears. Further, the relative strength index (RSI) has taken out the ascending trendline support. As a result, the emboldened bears may push the cryptocurrency down to the ascending (bullish) 50-candle MA, currently located at $6,735.
- A UTC close below $6,905 would confirm a spinning top bearish reversal and strengthen the odds of a downside break of the rising wedge pattern.
- A rising wedge breakdown would signal a resumption of the sell-off from the July high of $8,507 and could yield a drop to $6,000 (February low).
- A close today above the 100-day MA would keep the bulls in the game and allow a sustained move above $7,200 in the next couple of days.
Disclosure: The author holds no cryptocurrency assets at the time of writing.