Bitcoin Faces Drop Below $8,000 Despite Beating Price Resistance
Bitcoin has crossed the 20-day moving average (MA) hurdle but remains in bearish territory below the long-term resistance of the 200-day MA.
Daily and weekly charts indicate scope for a drop to $7,750.
A UTC close above the 200-day MA at $8,718 is needed to weaken the bearish case.
Bitcoin appears likely to drop below $8,000, despite having scaled a widely tracked technical resistance level.
The top cryptocurrency by market value is trading above the 20-day moving average for the first time since mid-September. The MA line was crossed multiple times over the weekend, but on each occasion the breakout was brief.
At time of writing, BTC seems to have found more solid acceptance above the 20-day MA, having defended the level at $8,252 during the Asian trading hours on Monday.
The move above the 20-day MA is good news, according to popular analyst Josh Rager.
Rager is also expecting bitcoin’s price volatility to rise soon, as the Bollinger bands have converged sharply over the last few days. A low-volatility period, as seen in the last two weeks, often ends with a big move on either side.
While some traders may anticipate a big move to the higher side, given the price has scaled the 20-day MA, the technical charts remain bearish. Further, prices are still holding well below the key 200-day MA, which has acted as strong resistance over the last 2.5 weeks.
Daily and 4-hour charts
BTC carved out a large bearish outside bar reversal candle on Friday (above left), signaling an end of the recovery rally and shifting risk in favor of a drop below $8,000. That candle is still valid with prices holding well below the high of $8,820 hit on Friday.
As mentioned, the cryptocurrency is trading well below the 200-day MA at $8,718 (above left). BTC has failed to close above the long-term average multiple times since Sept. 27, dampening prospects of a stronger recovery rally and making it the level to beat for the bulls.
Above right, the 4-hour chart is reporting a failed double bottom breakout and a rising channel breakdown – a bearish setup.
BTC ended last week on a positive note, but faced rejection at the 5-week MA, reinforcing the downward sloping average’s bearish bias.
The 5- and 10-week MAs continue to trend south this week, while the relative strength index (RSI) is holding bearish below 50.
All-in-all, BTC risks falling below $8,000 and extending losses, possibly to the 100-week MA support at $7,760, in the short term.
The bearish case would weaken if prices find acceptance above the 200-day MA at $8,718, but that looks unlikely at press time.
Disclosure: The author holds no cryptocurrency assets at the time of writing.