Bitcoin Price Faces Minor Pullback as Indecision Creeps into Market
With the bitcoin (BTC) market showing signs of indecision, prices could soon retreat back below $4,000.
The world’s largest cryptocurrency by market capitalization witnessed two-way business yesterday before ending largely unchanged on the day (as per UTC) at $3,995 on Bitstamp.
Worryingly for the bulls, BTC created a doji candle on Tuesday – widely considered a sign of indecision in the market – even though a bull flag breakout, witnessed yesterday, had seemingly set the stage for a move above $4,300.
Notably, the candlestick pattern appeared at the top of the recent recovery rally and near crucial resistance above $4,100, representing bullish exhaustion.
The bears, therefore, have an opportunity to make a slight comeback, especially if buyers fail to keep prices above the previous day’s low of $3,934.
As of writing, bitcoin is changing hands at $4,010 on Bitstamp, representing a 0.80 percent gain on a 24-hour basis.
As seen above, BTC has carved out a doji candle at the confluence of the 50-day exponential moving average (EMA) and the inverse head-and-shoulders neckline resistance.
The prospects of a bull breakout above $4,130 (neckline + 50-day EMA) would drop sharply if BTC confirms a bearish doji reversal with a UTC close below $3,934. That will likely put the focus back on the long-term bearish technical setup and allow a drop to $3,566 (Dec. 27 low).
It is worth noting that a drop towards $3,566 would imply inverse head-and-shoulders failure, which is widely considered a strong bearish signal.
Put simply, the bulls need progress soon. A UTC close above $4,130 would confirm an inverse head-and-shoulders breakout and open the doors for a stronger rally.
BTC witnessed a bull flag breakout on the 4-hour chart yesterday, signaling a resumption of the rally from the Jan. 6 low of $3,753.
So far, however, a break above the inverse head-and-shoulders neckline resistance of $4,130 has remained elusive. That said, the bull flag pattern is still valid and would lose credibility only below the previous day’s low of $3,934.
- Bullish exhaustion seen at the key hurdle above $4,100 could embolden the bears.
- A UTC close below $3,934 could yield a drop to $3,566 (Dec. 27 low). A break below that level would violate the bullish-higher low pattern and expose the December low of $3,122.
- On the higher side, $4,130 is the level to beat for the bulls. An inverse head-and-shoulders breakout, if confirmed, would invalidate yesterday’s doji and open up upside towards the psychological hurdle of $5,000.
Disclosure: The author holds no cryptocurrency assets at the time of writing.
Bitcoin chart image via Shutterstock; Charts by Trading View