Bitcoin’s (BTC) corrective rally has run out of steam in the last 12 hours.
While that’s not good news for the bulls, only a clear break below $7,000 would kill the odds of a move higher to $7,800-$8,000, the technical charts indicate.
The cryptocurrency clocked a high of $7,509 at 19:00 UTC yesterday, according to Bitfinex data, before retreating to $7,070 at time of writing.
The pullback has neutralized the immediate bullish outlook. Furthermore, the cryptocurrency has created a minor, bearish head-and-shoulders pattern, as seen in the chart below.
A break below $7,250 (head-and-shoulders neckline) would add credence to the breach of the ascending trendline and will likely yield a drop to $7,000 (target as per the measured height method). That would mean the corrective rally from the low of $6,425 has ended, given the head-and-shoulders is a bearish reversal pattern.
However, the momentum studies are still biased to the bulls: 50-hour moving average (MA) and 100-hour MA are climbing, while the 200-hour MA has shed bearish bias (flatlined). So for now, it appears any dip to or below $7,000 will likely be short-lived.
That said, the odds of a corrective rally to $7,800 (channel resistance) and $8,000 (psychological mark) would drop sharply if BTC closes (as per UTC) below $7,000.
BTC closed yesterday above the key resistance (now support) of $7,240 (March 18), strengthening the case for a corrective rally to $7,800.
The 5-day MA has turned higher (adopted bullish bias) in response to the uptick in prices.
If, however, bitcoin closes below $7,000 today, it would add credence to the downward sloping (bearish biased) 10-day MA and signal failure to hold above hold above $7,240. Further, the 5-day MA would adopt a bearish bias, derailing the bottoming out process.
Hence, BTC needs to defend $7,000 to avoid further losses.
Acceptance below $7,250 could yield a pullback to $7,000, although the decline could be quickly undone as suggested by the positive hourly momentum studies.
A close below $7,000 would signal the corrective rally from $6,425 has ended at $7,509.
On the higher side, a convincing move above $7,509 would allow a rally to $7,800 (falling channel resistance).
An upside break of the falling channel would confirm the short-term bullish reversal.
Bitcoin image via Shutterstock