On Wednesday, bitcoin suffered its weakest UTC close in over seven weeks, reinforcing the bearish view put forward by the rejection at the 50-candle moving average (MA) on the 6-hour chart. The close at multi-week lows also dashed hopes of a falling wedge breakout.
The cryptocurrency created a bearish outside reversal candle on the daily chart, opening the doors to the falling channel support, currently at $3,230.
A strong move above the 50-candle moving average on the 6-hour chart, currently at $3,434 will likely weaken bearish pressures and yield a corrective bounce to resistance near $3,650.
With bitcoin (BTC) closing yesterday at the lowest level in 7.5 weeks, the gradual sell-off is showing no signs of abating.
On Wednesday, the leading cryptocurrency by market value ended (UTC) at $3,328 – the weakest daily close since Dec. 16 – according to Bitstamp data, dashing hopes of an upside break of the falling wedge pattern carved out over the last six weeks.
Further, it created a bearish lower high at the crucial resistance of the 50-candle moving average (MA) on the 6-hour chart. That average line has reversed several attempted corrective rallies over the last three weeks, as discussed yesterday.
As a result, the slow drip sell-off from December highs above $4,200 witnessed over the last six weeks is likely to continue. BTC could soon challenge recent lows near $3,300 and may extend the decline toward the low of $3,100 seen in December.
At press time, BTC is trading largely unchanged on the day at $3,380.
As seen above, yesterday’s high and low engulfed Tuesday’s price action. Essentially, BTC created a bearish outside candle, which indicates that the day began with optimism but ended on a pessimistic note. Put simply, the sell-on-rise mentality is still strong.
Hence, the cryptocurrency risks falling to the descending channel support, currently at $3,230.
Supporting that bearish case if the 14-day relative strength index of 38 and the downward sloping 20-day moving average (MA).
On the 6-hour chart, 50-candle MA has proved a tough nut to crack for close to three weeks. Hence, a convincing break above that average, currently at $3,434, may embolden the bulls, leading to a stronger rally toward the resistance at $3,658 – the high of the bearish gravestone doji created on Jan. 26.
Disclosure: The author holds no cryptocurrency assets at the time of writing.
Bitcoin image via Shutterstock; Charts by Trading View