Despite having witnessed a so-called “death cross” over the weekend, bitcoin (BTC) is now eyeing gains above the $7,000 mark.
The much-feared technical indicator (bearish crossover between the 50-day moving average (MA) and the 200-day MA) was confirmed over the weekend, but, as anticipated by CoinDesk, the oversold conditions seem to have put a floor under bitcoin prices.
As of writing, CoinDesk’s Bitcoin Price Index (BPI) is seen at $7,040, having clocked a 54-day low of $6,443 on Sunday. Meanwhile, the cryptocurrency was last seen changing hands at $7,060 on Bitfinex – up 9.88 percent from the previous day’s low of $6,425.
The recovery is pretty much in line with the historical pattern, which shows that bitcoin tends to regain poise every time the relative strength index (RSI) drops to or below 30.00.
As seen on the daily chart prices as per Bitfinex) above, the RSI fell to 30.00 on Friday, signaling oversold conditions. Further, the death cross was confirmed on Saturday, but did not do significant damage to bitcoin’s price.
It’s worth noting that the death cross looked pretty unconvincing before it occurred, i.e. the 50-day MA turned neutral (flatlined) a week ago and remains neutral after the bearish crossover, validating the argument put forward by the daily RSI that BTC is oversold. A falling 50-day MA pre- and post-crossover could have brought in a lot of technical sellers.
Further, the cryptocurrency has successfully defended the key ascending trendline seen on the weekly chart below.
Weekly chart (linear scale)
Bitcoin avoided a break below the confluence of the ascending trendline and the rising (bullish biased) weekly 50-MA, amid oversold conditions.
So, it appears the cryptocurrency has made a short-term low at $6,425 and could visit $7,500-$7,600 in the next few days, as indicated by the bullish-RSI divergence on the chart below.
BTC has breached the descending trendline, but only a clear break above $7,100 (channel resistance) would add credence to the bullish RSI divergence and allow a rally to $7,500-$7,600.
That said, further gains are ruled out in the short-term, because the 10-day MA is biased to the bears (sloping downwards).
Daily chart II
In the chart above, the 5-day MA and 10-day MA are bearish, and a sustained rally to $8,000 and beyond is only likely after they have bottomed out.
BTC seems to have made a temporary low at $6,425. A clear break above $7,100 could yield a rally to $7,600.
Further gains cannot be ruled out, but will likely happen only after the 5-day MA and 10-day MA have shed bearish bias.
On the downside, $6,425 is an immediate support, which if breached, would allow a re-test of the February low of $6,000. However, the bears will have a tough time taking out support $6,425, courtesy of short-term oversold conditions.
Bitcoin and dollars image via Shutterstock