Bitcoin looks set to close the month below a key long-term support level for the first time in three years.
The 21-month exponential moving average (EMA), which worked as a price plan for five consecutive months, was convincingly violated on 15 November. At the time of writing, the former support turned into resistance stood at $ 5,896, while BTC is changing hands at $ 3,650 on Bitstamp.
The decline below the EMA support marks the resumption of the sell-off from the record level of $ 20,000 reached in December, which means that the path of least resistance is downward. Therefore, while an oversold rebound could be seen in the short term, a recovery up to the levels above 21 months is now excluded.
Therefore, a monthly closing on Friday (UTC time) below the 21-month EMA seems to be an operation concluded. In particular, this would be the first monthly closing below the EMA support since October 2015.
As seen above, the 21-month EMA has limited the disadvantage from June to October. The persistent failure of the bear, however, failed to attract the bulls.
The graph also shows that the last outage of BTC below the 21-month EMA to which it was subjected to a testament in September 2014 remained valid for 13 months. If historical data is a guide, then the cryptocurrency may remain below the resistance level for some time.
The outlook for the next 24 hours remains bearish, as BTC is trapped in a falling channel on the 4-hour chart. In addition, the stacking order of the ETMA with 50 candles under the EMA at 100 candles, under the EMA at 200 candles is a classic bearish indicator.
The relative strength index (RSI), however, shows a bullish divergence. That model, however, would gain credibility only if prices manage to cancel immediate resistance at $ 4000.
- The fall in BTC below the fundamental 21-month EMA support may have reduced the likelihood of leaving the bear market for another month.
- A break below the Sunday minimum of $ 3,474 would mean that the recovery at $ 4,000 was just another rebound from a dead cat and that prices could then drop to a psychological support of $ 3,000.
- BTC can test $ 4,500 (top margin of the falling channel) in the next 24 hours if prices cancel the psychological obstacle of $ 4,000, validating the bullish divergence of the 4-hour chart RSI.
- Prospects as per the monthly table would become bullish above the new resistance of the 21-month EMA, currently at $ 5.896.
Revelation: The author does not hold cryptocurrency assets at the time of writing.
Bitcoin image via Shutterstock; charts of Trading View