Bitcoin (BTC) is still in recovery mode, but the bulls must keep prices above key support seen just below $6,500 to maintain momentum, the technical charts indicate.
The cryptocurrency clocked a high of $6,736 on Bitfinex yesterday amid signs of a bear breather. However, bargain hunters were short in supply and prices fell back below $6,600 at 01:00 UTC today. Bitcoin has spent a better part of the last seven hours trading in the narrow range of $6,550 to $6,620.
As of writing, BTC is changing hands at $6,590 – up 7.2 percent from Wednesday’s 18-week low of $6,109.
While it is too early to call a bottom, the nascent recovery shows promise, with bitcoin holding well above the former support-turned-resistance of $6,425 (April 1 low).
As per the charts, though, an unexpected break below $6,480 could pour cold water on the optimism and signal a resumption of the sell-off.
The chart shows BTC has created a bear flag – a bearish continuation pattern. A break below $6,480 (flag support) would mean the corrective rally from the recent low of $6,109 has ended and the bear market has resumed.
Such a bear flag breakdown, if confirmed, would allow a sell-off to $5,750 (target as per the measured height method, i.e. pole height subtracted from breakdown price).
That target looks feasible when viewed against the backdrop of bearish long-term technical setup. Further, the 7 percent recovery from the recent lows has lifted the relative strength index (RSI) well above oversold region (below 30.00) providing scope for further sell-off.
What’s more, the RSI is teasing a break below the ascending trendline (bearish signal).
Clearly, the odds are high that corrective rally could fall apart below $5,480. Meanwhile, the upside is seen gathering traction if BTC finds acceptance above the immediate resistance of $6,619 (dotted yellow line in the hourly chart).
Bear flag breakdown (a move below $6,480) would imply resumption of the sell-off and could yield a drop to $5,750.
A daily close (as per UTC) below $6,000 (February low) would only bolster the already bearish long-term technicals and open up downside towards the $5,000 mark.
On the higher side, acceptance above $6,618 could bring a climb towards resistance located at $6,900 (June 11 high) and $7,000 (psychological mark).
Bitcoin image via Shutterstock