Bitcoin recently broke below a short-term rising trend line to indicate that a downtrend is due. Price bounced off the $3,400 mark and might be heading for a pullback to the nearby Fibonacci retracement levels.
The 61.8% level is closest to the broken trend line around the $3,500 level that might hold as resistance moving forward. This is also in line with the 100 SMA dynamic inflection point that adds to its strength as resistance.
On the subject of moving averages, the 100 SMA is below the longer-term 200 SMA to indicate that the path of least resistance is to the downside. In other words, the selloff is more likely to gain traction than to reverse. The 200 SMA also lines up with the broken rising trend line to serve as an additional upside barrier.
RSI is still heading north and has some room to climb before indicating overbought conditions or exhaustion among buyers. This suggests that bulls could stay in the game for a bit longer and allow the retracement to go on. Stochastic is also on the move up but already approaching the overbought zone to signal weakening bullish pressure. Turning lower could signal that sellers are returning and a test of the swing low could follow.
Bitcoin managed to keep its head above water thanks to positive commentary from JP Morgan’s Global Market Strategist Nikolaos Panigirtzoglou. Recall that he was previously bearish on bitcoin, so his prediction that price could make a comeback has attracted some bullish vibes. He says:
“The stability that we are seeing right now in the cryptocurrency market is setting the stage for more participation by institutional investors in the future. The cryptocurrency market was a new market. It went through a bubble phase [and] the burst.”
However, he did caution that the big obstacle right now are regulators as it is taking some time for them to acknowledge the potential in the space.