Bitcoin at risk of deeper pullback towards $20K: Chart analysts
Bitcoin’s (BTC) recent technical failure at key price resistance has increased the risk of a deeper pullback, according to analysts studying price charts.
The leading cryptocurrency’s rally has recently stalled, with prices failing to break the $25,200 resistance that capped August’s rally.
“Bitcoin has been unable to break out above resistance in the trading area near $25.2K, resulting in a whipsaw lower for the daily MACD,” Katie Stockton, founder and managing partner at Fairlead Strategies, said in a note to clients on Monday, using the acronym for “moving average divergence/convergence,” an indicator used to measure trend strength and trend changes. “Given the MACD ‘sell’ signal, and with room for oversold levels per daily stochastic, we are shifting to a bearish short-term bias.”
Stockton expects bitcoin to return to $20,000 after briefly stabilizing around the 50-day simple moving average, currently at $22,567. At press time, bitcoin was changing hands near $23,500.
The MACD histogram has recently dipped below zero, indicating a bearish shift in momentum. Adherents of technical analysis consider MACD’s bearish shift to be a sell signal.
Meanwhile, the stochastic indicator, which is used to measure overbought and oversold conditions, has yet to fall below 30, suggesting room for price declines. A reading below 30 indicates that an asset is oversold and usually marks the end of a price decline.
According to Alex Kuptsikevich, senior market analyst at FxPro, bitcoin’s weekly chart also favors a deeper pullback.
“Technically, bitcoin is selling off after touching its 200-week moving average. And due to the negative momentum at the end of the week, it has also fallen below the 50-week moving average. This dynamic could be a prologue to further declines.” , a predictable tug-of-war near trend levels,” Kuptsikevich said in an email Monday.
Bitcoin has turned lower from its 200-week simple moving average (SMA) after facing rejection above the same for two consecutive weeks.
The 50-week SMA has fallen below the 200-week SMA, producing what is known as the “death cross”, a bearish trend.
However, the expected price drop will be a temporary bull’s breath, according to Kuptsikevich.
“A pullback in bitcoin to $21.5,000 would remain a correction in a bull market, but a sharp drop below that level could force a reassessment of whether we are out of a bear market,” Kuptsikevich said.
