Bitcoin Faces Fresh 2018 Lows After Close Below $6,000 Support

Bitcoin (BTC) could post new 2018 lows over the weekend, having found acceptance below key price support.

Despite signs of a possible corrective rally seen earlier yesterday, the leading cryptocurrency closed below $6,000 for the first time since November 12, signaling a downside break of a major support (February low).

While the bears had briefly pushed prices down to $5,755 (2018 low) last Sunday, a close below $6,000 had remained elusive.

Now that prices sit below $6,000, the focus is back on the long-run bearish technical charts, which continue to call a move lower to $5,000.

At press time, BTC is changing hands at $5,904 on Bitfinex โ€“ down 3.4 percent on a 24-hour basis.

Meanwhile, other cryptocurrencies are also flashing red this morning. Names like EOS, litecoin (LTC), cardano (ADA) are reporting 6 percent drops on a 24-hour basis. Meanwhile, ethereum (ETH) and XRP are down 4 percent each, according to CoinMarketCap.

Despite the drop below support, bitcoin is still outperforming most other cryptocurrencies and is now at 11th place on the list of best performing top-100 cryptocurrencies by market capitalization.

Clearly, investors have become more risk-averse, venturing out of high-risk cryptocurrencies and into bitcoin (and possibly then on to fiat currency). Consequently, the BTC dominance rate has climbed to 43 percent โ€“ the highest level since April 12.

Unfortunately for the bulls, the stage looks set for a further decline in bitcoin prices. Even so, the bears still need to keep their eyes open, as the unwinding of short positions ahead of monthโ€™s end and more importantly, quarterโ€™s end, could again lift prices above $6,000.

Daily chart

The close below $6,000 support has bolstered the already bearish technical setup as indicated by the falling channel (series of lower highs and lower lows), downward sloping 5-day and 10-day moving average (MA).

Further, bitcoin is trading well below 50-day, 100-day and 200-day MAs, indicating that the long-term bias is bearish. Whatโ€™s more, the long-term averages are aligned one below the other and are trending south.

The bearish sentiment is quite an obstacle to overcome right now, as the bullish price-to-relative strength index (RSI) and price-to-money flow index divergences seen earlier this week failed to yield a notable corrective rally.

Other indicators are also pointing to a strong bearish sentiment. For instance, the Chaikin money flow (CMF), an oscillator that measures buying and selling pressure, is printing negative values for the fifth consecutive week.

The drop below $6,000 also adds credence to the pennant breakdown seen in the weekly chart and the bearish crossover between the 5-month and 10-month moving average.

View

  • Short-term outlook: Bearish, having closed below $6,000 yesterday.
  • Long-term outlook: Bearish, as indicated by the pennant breakdown on the weekly chart.
  • BTC could break below $5,755 (June 23 low) and could extend the decline towards the next major support located at $5,400 (November 12 low).
  • Only a high-volume falling-channel breakout would confirm a short-term bullish-to-bearish trend change.

Fairground ride image via Shutterstock



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