Bitcoin’s price recently broke below a symmetrical triangle consolidation pattern to signal that a selloff of the same height is about to follow. However, bulls were quick to defend the $3,400 area so a pullback may be due.
Applying the Fibonacci retracement tool on the breakout move shows that the 61.8% level is closest to the broken triangle bottom and a former support area. This is also near the 100 SMA dynamic inflection point.
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 bottom of the triangle as an extra upside barrier.
Bitcoin is currently testing the 38.2% Fib, which may already be enough to keep gains in check. If any of the next levels hold as a ceiling, Bitcoin could resume the slide to the swing low or lower. Note that the triangle spans $3,420 to around $3,620 so the resulting drop could be of the same height.
RSI is still treading higher, though, which means that there’s a bit of energy left among bulls. Stochastic is also heading up and nearing the overbought zone, so buyers might push a little higher from here. Once both oscillators hit the overbought levels and turn back down, selling pressure might return.
Still, Bitcoin is drawing some support from positive commentary by JPMorgan’s Global Market Strategist Nikolaos Panigirtzoglou who suggests that it might see a resurgence on Wall Street. In an interview with CNBC 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.
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