Bitcoin is still looking south, having hit four-month lows today, but the bearish momentum may wane due to short-term oversold conditions, the technical charts indicate.

    More bears joined the party in the U.S. session Tuesday after the cryptocurrency failed to cross twin resistance at $6,859 (50-hour moving average (MA) and 23.6 percent Fibonacci retracement).

    As a result, the price fell to $6,370 on Bitfinex today, the lowest level since Feb. 6. At press time, bitcoin was slightly higher at $6,453.

    The drop to the four-month low has bolstered the already bearish technical setup and raised the odds of a sell-off to $6,000 (February low).

    However, the bears may take a breather over the next day or two, as the relative strength index (RSI) is hovering at the key bullish reversal zone, and bitcoin could hold around support at $6,400 or possibly see a minor corrective rally.

    Daily chart

    Currently, the RSI is holding below 30.00. Historical data shows BTC stages a “V”-shaped recovery every time the RSI drops to or below 30.00. However, things may pan out differently this time, as long-term technical charts are biased to the bears.

    Weekly chart

    The downside break of the pennant (bearish continuation pattern) indicates scope for a drop below the February low of $6,000.

    Further, on the weekly chart, the RSI fell below key support of 53.00 in February, signaling a long-term bullish-to-bearish trend change and is currently hovering below 50.00 (still in bearish territory). Clearly, the bears now have more say in determining the BTC/USD exchange rate.

    So, while the cryptocurrency may make a brief rally, courtesy of the oversold conditions, a major recovery will likely remain elusive.

    View

    • Longer term, BTC is still eyeing a drop to $6,000 amid a generally bearish market.
    • In the next 48 hours, bearish momentum may weaken and prices could revisit the 5-day MA, currently located at $6,800.
    • The probability of a major “V-shaped” recovery is low.
    • Only a daily close above 10-day MA, currently seen at $7,214, would signal bearish invalidation.

    Bitcoin on chart image via Shutterstock


    The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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