- A high-volume range breakdown seen on the daily chart suggests scope for test of a long-term moving average at $7,200. A violation there would expose another major average support at $7,000.
- A corrective bounce above resistance at $7,534 could be seen before a deeper drop, as the intraday charts are reporting oversold conditions.
- A lagging indicator suggests BTC may bottom out in the range of $7,000 to $7,200.
- A UTC close above the Oct. 21 high of $8,352 is needed to confirm a bullish reversal.
Long-term bitcoin price support at $7,200 may be put to test for the first time in six months, likely after a minor price bounce.
The crypto market leader fell by $500 to $7,500 during the U.S. trading hours on Wednesday, confirming a downside break of the recent trading range of $7,800 to $8,400.
Prices went on to hit a five-month low of $7,293 before printing a UTC close at $7,470 – down 6.92 percent on the day, according to Bitstamp data. That’s the biggest single-day drop since Sept. 24, when prices had declined by 11.83%.
The range breakdown indicates the sell-off from highs above $10,000 seen on Sept. 23 has resumed and prices could test support at $7,200 – the 100-period moving average on the three-day chart. That MA line was last put to test at the end of April.
The drop to the key support, however, may be preceded by a minor corrective bounce, as the intraday chart indicators are reporting oversold conditions.
As of writing, BTC is changing hands at $7,470 on Bitstamp, representing a 46 percent loss from 2019’s high of $13,880 registered on June 26. That said, the cryptocurrency is still reporting a 100 percent gain on a year-to-date basis and is the best performing asset of 2019.
Daily and 3-day charts
Wednesday’s range breakdown (above left) is backed by an uptick in trading volumes to the highest level since Sept. 26 and looks to have legs.
The 14-day relative strength index (RSI) has dived below the ascending trendline, invalidating the bullish divergence confirmed on Oct. 6. A failed bullish divergence is widely considered as a powerful bearish signal.
As a result, the cryptocurrency appears on track to test the three-day chart 100-candle MA at $7,200 (above right). A violation there would expose the 200-candle MA, currently located just below $7,000.
The sell-off may stall around the aforementioned crucial support levels, as the 50- and 200-day moving averages (MAs) are about to produce a death cross – a bearish, but a lagging indicator, which trapped sellers on the wrong side of the market in April 2018 and September 2015.
Hourly and 4-hour charts
The RSIs on the hourly and 4-hour charts are reporting oversold conditions with a below-30 print. So, a corrective bounce cannot be ruled out.
The former support-turned-resistance of $7,714 (Sept. 30 low) could come into play if the immediate resistance at $7,534 (horizontal line on hourly) is scaled in the next 24 hours.
The outlook would turn bullish if and when prices rise above the Oct. 20 high of $8,352, invalidating the bearish lower highs setup on the daily chart.
Disclosure: The author holds no cryptocurrency assets at the time of writing.