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With the bitcoin market (BTC) showing signs of indecision, prices may soon fall below $ 4000.
The largest cryptocurrency in the world by market capitalization saw yesterday the two-way business before ending largely unchanged the day (as per UTC) to $ 3.995 on Bitstamp.
As for the bulls, BTC created a doji candle Tuesday – widely considered a sign of indecision in the market – although a bull flag break, witnessed yesterday, had apparently prepared the ground for a move above $ 4,300.
In particular, the candle pattern appeared at the top of the recent recovery rally and near the crucial resistance above $ 4,100, which represents bullish exhaustion.
Bears, therefore, have the opportunity to make a slight return, especially if buyers fail to keep prices above the previous day's minimum of $ 3,934.
At the time of writing, bitcoin is changing hands at $ 4.010 on Bitstamp, representing a 0.80% gain on a 24 hour basis.
Daily chart
As seen above, BTC has obtained a doji candle at the confluence of the 50-day exponential moving average (EMA) and the reverse resistance of the head-shoulders neckline.
The outlook for a bullish breakout of more than $ 4,130 (neckline + EMA of 50 days) will drop drastically if BTC confirms a reversal of bearish doji with a closing of UTC of less than $ 3,934. This will probably put the emphasis on the long-term bearish technical configuration and allow a decline to $ 3.566 (27 December minimum).
It is worth noting that a decline to $ 3,566 would imply a reverse bankruptcy of the head and shoulders, which is widely regarded as a strong bearish signal.
In other words, the bulls need progress soon. A UTC close above $ 4,130 would confirm a reversal of head and shoulders and will open the door for a stronger rally.
4-hour chart
The BTC witnessed a bullish flag breakout on the 4-hour chart yesterday, signaling a rally recovery from the January 6th low to $ 3,753.
So far, however, a break above the reverse resistance of the head-shoulders neckline of $ 4,130 has remained elusive. That said, the bull flag pattern is still valid and would lose credibility only below the previous day's low of $ 3,934.
view
- The bullish exhaustion seen at the exceptional obstacle over $ 4,100 could encourage bears.
- A UTC close below $ 3.934 could drop to $ 3.566 (December 27th low). A break below this level would violate the bullish-lower model and expose the December low of $ 3,122.
- On the higher side, $ 4,130 is the level to beat for the bulls. A reverse head and shoulder inversion, if confirmed, invalidates yesterday's doji and opens up to the psychological obstacle of $ 5,000.
Revelation: The author does not hold cryptocurrency assets at the time of writing.
Image of the bitcoin chart using Shutterstock; Charts for Trading View
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