Bitcoin’s Rejection at Key Price Hurdle Puts Short-Term Bull Trend at Risk
Bitcoin’s Rejection at Key Price Hurdle Puts Short-Term Bull Trend at Risk
- A sharp reversal from resistance at $7,800 on Wednesday has neutralized bitcoin’s short-term bullish setup.
- The cryptocurrency has created an inverted hammer on the daily chart, a warning of an impending sell-off. A break below the candle’s low of $7,087 will likely invite stronger selling pressure and yield a drop to $6,500.
- A UTC close above $7,870 (Nov. 29 high) is needed to revive the bullish view.
Bitcoin experienced a strong rejection at key resistance Wednesday, weakening the short-term bullish outlook.
The top cryptocurrency by market value quickly jumped from $7,200 to $7,800 during the U.S. trading hours on Wednesday, ending a low-volume pullback, as expected. The ascent, however, was short-lived, and prices fell back just as speedily – closing the day (UTC) with a 1.4 percent loss at $7,198, according to Bitstamp data.
The sharp move lower from $7,800 – a level that proved a tough nut to crack at the end of November – has increased the likelihood of bearish price action with the formation of a candlestick pattern called an “inverted hammer.”
While the pattern is considered a bearish signal, traders usually wait for confirmation in the form of strong follow-through, preferably a convincing move below the low of the candle.
Put
simply, a break below Wednesday’s low of $7,087, if confirmed, will likely
attract strong selling pressure, possibly leading to a deeper drop.
At press time, bitcoin is changing hands at $7,330, representing a 1.4 percent gain on a 24-hour basis.
The long upper shadow attached to the inverted hammer candle represents “sell on the rise” mentality.
So far, there’s been no bearish follow-through. However, that does not mean the path of least resistance is to the higher side, as the cryptocurrency is also held below the resistance of a descending trendline sloping downwards through the Oct. 26 and Nov. 15 highs.
A bullish reversal would only be confirmed if and when the cryptocurrency finds acceptance above $7,870 (Nov. 29 high), invalidating the lower-highs setup.
If prices find acceptance under $7,087 (inverted hammer’s low), that would imply a continuation of the sell-off from $7,870 and will likely yield a re-test of recent lows near $6,511.
Bitcoin charted a bullish hammer reversal pattern in the six days to Nov. 29. So far, however, the follow-through has been anything but bullish, and has faced strong rejection at $7,800, as noted above.
As a result, the immediate outlook is neutral.
Other indicators continue to call a bearish move. For instance, the 14-day relative strength index (RSI) remains below 50 and the 5- and 10-week moving averages continue to trend south.
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This article is intended as a news item to inform our readers of various events and developments that affect, or that might in the future affect, the value of the cryptocurrency described above. The information contained herein is not intended to provide, and it does not provide, sufficient information to form the basis for an investment decision, and you should not rely on this information for that purpose. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.
