The sell-off in the bitcoin-US dollar exchange rate (BTC/USD) appears to have stalled, with prices trading at $3,550 at press time.
Over the course of a volatile day, the cryptocurrency fell to a low of $2,980 oversold technical conditions came into play, as we discussed early today.
As per CoinMarketCap, the digital currency has lost 2% over the last 24 hours.
Bitcoin may have found a short-term bottom
The previous article had talked about a potential bullish price RSI divergence on the 4-hour chart. Well, the 4-hour chart is yet to confirm the bullish divergence, however, it has been confirmed on the 1-hour chart.
The chart above shows the bullish price RSI divergence (lower lows on the price chart and higher lows on the RSI).
The bullish pattern on the 1-hour chart indicates that bitcoin sell-off has run out of steam for now. Prices could test $3,550-3,600, which is the resistance offered by the downward sloping trend line.
Avoid being over ambitious
The bullish setup on the 1-hour chart is valid for a couple of hours. Bitcoin is unlikely to see significant gains above $3,550-3,600 as the Stochastics is close to being overbought.
Watch out for a bullish divergence on the 4-hour chart
The argument that bitcoin has found a short-term bottom at $2,980 would gain more credence if the bullish-price RSI divergence is confirmed on the 4-hour chart.
Bitcoin is likely to consolidate largely in the range of $3,100 to $3,600. Markets seem to have priced-in the bearish news out of China. Unless there is more damaging news out of China, the range is not likely to be breached to the downside.
Ferris wheel image via Shutterstock
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Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.