Having dropped back from eight-day highs hit this morning, bitcoin (BTC) price could be in for a bout of consolidation before further upside unfolds.
The cryptocurrency rose to $6,596 earlier today on Bitfinex – the highest level since Sep. 6 – adding credence to the short-term bullish reversal signaled by the symmetrical triangle breakout earlier this week.
However, despite the strengthening bullish case, BTC quickly lost around $200 soon before press time. As if writing, BTC is changing hands at $6,450, having printed an intraday low of $6,355 a few minutes ago.
While the sudden price pullback could force investors to question the sustainability of the corrective rally, the short-term technical charts continue to show that the path of least resistance is on the higher side.
BTC’s retreat from the highs near $6,600 is likely associated with the bearish divergence of the relative strength index seen in the hourly chart.
Indeed, the RSI has adopted a bearish bias, but it is premature to call an end of the technical recovery, as the major moving averages (MAs) – 50-hour, 100-hour, and 200-hour – are still trending north in favor of the bulls
More importantly, the key MAs are capping the downside at press time. This leaves scope intact for a recovery to resistance at $6,800 (multiple daily highs).
On the daily chart, BTC closed (as per UTC) above the 10-day MA yesterday, neutralizing the bearish view put forward by the rising wedge breakdown on Sept. 5.
However, the short-term MA is still sloping downwards. This, coupled with the bearish RSI divergence on the hourly chart could keep the cryptocurrency range-bound for the next 24 hours or so.
It’s worth noting that technical recovery usually gathers speed after the short-term MAs bottom out – unless, of course, there is a major positive fundamental news.
BTC has retreated from eight-day highs, but the technical recovery is still intact.
The cryptocurrency could consolidate around $6,400 in the next few hours before resuming the journey towards $6,800.
A UTC close below the trendline connecting the June low and Aug. 11 low would put the focus back on the rising wedge breakdown witnessed earlier this month and could yield a drop below $6,000 (February low).
Disclosure: The author holds no cryptocurrency assets at the time of writing.