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Bitcoin is still stuck in its bullish flag pattern and waiting for momentum to return while consolidating in a small channel. Looking closer at this channel shows the levels to watch to gauge a breakout or pullback.
Price is hitting resistance at the $3,700 level that lines up with the top of the longer-term descending channel. Support is located around $3,600 but a break below this could lead to a correction instead.
The 100 SMA is above the longer-term 200 SMA to indicate that the path of least resistance is to the upside. In other words, price is more likely to break higher than down. However, the gap between the moving averages is narrowing to reflect slower bullish momentum. Price is testing the 100 SMA dynamic inflection point but is still above the 200 SMA dynamic support.
RSI is turning lower to signal the presence of selling momentum even though overbought conditions haven’t been met. This signals that bears are eager to push prices lower. Stochastic is also moving down without having reached the overbought zone, also indicating that sellers are in play.
In that case, bitcoin could break below the flag support and the nearby 200 SMA to pull back to the area of interest around the middle of the channel. A larger slide could last until the lows at $3,400 or the very bottom of the channel.
Bitcoin enjoyed a strong boost from bullish forecasts a few days back claiming that price could reach $5,000 over the next ten days. A few days have already gone by and price is not any closer to the target, so it’s understandable that traders might be letting go of some of their holdings.
The next wave higher could come if an actual development in terms of seeing stronger institutional volumes is seen. However, this could take until next month when Fidelity pushes through with its institutional platform launch.
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