A quick recovery from one-week lows seen today may have helped bitcoin (BTC) avert a bigger sell-off, but the bulls are not out of the woods yet.
The leading cryptocurrency by market capitalization established a bearish lower-high pattern at $4,400 last week and closed (UTC time) well below $4,000 yesterday, confirming an end of the corrective bounce.
As a result, BTC was on the defensive earlier today, with prices hitting a one-week low of $3,730 on Bitstamp, before quickly rising back to near $4,000.
The sudden recovery from one-week lows likely indicates that sellers are reluctant to step in at current levels and may be exhausted, having pushed the cryptocurrency down by more than 30 percent through November.
That said, a short-term bullish reversal would be confirmed only above the recent high of $4,410.Â At press time, BTC is changing hands at $3,955, representing marginal losses on the day.
As seen above, BTC struggled to close above the 10-day exponential moving average (EMA) for four days straight before falling below $3,861 (Nov. 30 low) yesterday.
BTC’s break below that key support confirmed an end of the oversold bounce. Further, the 5- and 10-day exponential moving averages (EMAs) continue to trend south in favor of the bears.
So, the indicators appear to be pointing to the downside. That, however, would change if prices establish a higher-lows and higher-highs pattern with a convincing move above $4,410 (Nov. 29 high).
Over on the hourly chart, BTC’s recovery from seven-day lows has established a bullish divergence of the relative strength index (RSI). As a result, BTC may witness a falling channelÂ breakout in the next few hours.
The breakout, if confirmed, would open the doors to $4,410.
- The odds of an immediate drop toward $3,500 have dropped somewhat with BTC’s quick recovery from the one-week low of $3,730.
- A falling channel breakout on the hourly chart would open up upside toward $4,410 (Nov. 29 high). A UTC close above that level would signal a continuation of the recovery rally from the 14-month low of $3,474 hit on Nov. 25.
- A drop below $3,730 (today’s low) would put the focus back on the overall bearish technical setup and could yield a re-test of $3,474.
Disclosure:Â The author holds no cryptocurrency assetsÂ at the time of writing.