Bitcoin is still treading mostly sideways but it seems that a short-term reversal pattern is forming. An inverse head and shoulders can be seen on the 1-hour time frame and price is already testing the neckline.
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. Price also seems to be finding resistance at the 200 SMA dynamic inflection point which lines up with the reversal pattern’s neckline.
A break above this resistance around the $3,750 area could lead to a climb that’s the same height as the chart formation, which spans $3,550 to $3,700. The gap between the moving averages is narrowing to signal weakening selling pressure and a possible bullish crossover that could draw more buyers in.
However, RSI is turning lower after hovering close to the overbought region, indicating that sellers are starting to return. In that case, Bitcoin could still dip to nearby support levels at the $3,650 level or to the $3,550 dip. Stochastic is also indicating overbought conditions and is starting to turn lower to signal a return in selling momentum.
However, Bitcoin might need a strong catalyst to spur that needed upside break and even then, upside is limited. Recall that price is also trending lower inside a descending channel on the 1-hour time frame and also another one in the longer-term charts.
Optimism earlier in the year appears to have faded as there weren’t many headlines to support expectations of institutional investments. Besides, uncertainty has been in play in the global financial markets owing to the US government shutdown and Brexit risks, also dampening traders’ demand for riskier holdings like crypto. The technical break below the key $4,000 barrier also drew increased selling interest.
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