Bitcoin (CRYPTO: BTC) traded flat during Monday’s 24-hour trading session on declining volume after rallying 4% on Sunday to close just above the $28,000 mark. Credit Suisse failure and the bank’s subsequent acquisition.
The sideways consolidation was necessary because Bitcoin’s relative strength index measures around 72%, placing the crypto in overbought territory.
RSI is an indicator technical traders use to measure bullish and bearish price momentum. RSI levels can range between 0 and 100, with levels between 30 and 70 generally considered healthy.
ENTER TO WIN $500 IN STOCKS OR CRYPTO
Enter your email and you’ll also receive Benzinga’s ultimate morning update AND a free gift card of $30 and more!
When a stock’s RSI falls below the 30% level, it is considered oversold. When a stock enters oversold territory, it indicates that the security’s price no longer reflects the asset’s true value, which could signal a reversal to the upside is in the cards.
When a stock’s RSI rises above the 70% range, it is considered overbought. When a stock enters overbought territory, it signals that the asset’s price is elevated compared to its intrinsic value, which could signal a reversal to the downside is on the horizon.
The RSI is best used when combined with other signals and patterns on a stock chart because stocks can remain in oversold and overbought territory for an extended period of time before turning.
Do you want direct analysis? Find me in the BZ Pro lounge! Click here for a free trial.
The Bitcoin Chart: Between March 10 and the high of the day on Sunday and Monday, Bitcoin has rallied over 46%, driving the RSI into overbought territory. The sideways consolidation is healthy because it helps lower Bitcoin’s RSI.
- Bitcoin trades in an uptrend, creating a consistent series of higher highs and higher lows. The crypto’s most recent high was printed on Sunday and Monday just above $48,000, and the most recent high low was formed at the $23,931 mark on March 15.
- The sideways consolidation on Monday took place near the top of Sunday’s trading range, which has shaped Bitcoin into an inside bar pattern. The inside line leans bullish because Bitcoin was trading higher before the pattern formed. Traders can look for the crypto to break up or down from Sunday’s range on higher-than-average volume to gauge future direction.
- Bitcoin has resistance above at $28,690 and $31,418 and support below at $25,772 and $25,288.
