Zinger Key Points
- Bitcoin fell bearishly through a falling channel pattern, indicating the downtrend pattern is dominant.
- A bounce is likely to come because Bitcoin's RSI is nearing oversold territory.
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Bitcoin BTC/USD dropped bearishly through a falling channel pattern on the daily chart during Friday’s 24-hour trading session, which is the opposite of how the crypto has reacted to the same pattern since mid-July.
The downward move preceded a bearish day in the general markets, where the S&P 500 opened slightly lower and became pressured intraday, losing about 1.34%.
Bitcoin’s sharp decline dragged the crypto sector down with it, Ethereum ETH/USD was plunging over 8% in unison, Dogecoin DOGE/USD was sliding over 7% while Ethereum Classic, one of the hardest hit of the popular crypto’s was plummeting over 11%.
The reason for the steep decline isn’t immediately clear. Bitcoin’s daily volume on Coinbase, although higher-than-average, wasn’t surging enough to indicate a flash crash was taking place.
A flash crash is often driven by algorithms that pick up when selling volume is increasing rapidly.
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The Bitcoin Chart: When a stock or crypto declines sharply over a short period of time, a bounce to the upside usually follows. When the bounce comes, bullish traders will want to see Bitcoin regain the 50-day simple moving average as support and then for the crypto to trade sideways above the level to consolidate.
The downtrend Bitcoin was trading in within the falling channel became the dominant pattern when the crypto fell through the bottom descending trendline of the pattern.
The most recent lower high was formed at the $24,448 mark on Aug. 17 and the most recent confirmed lower low was printed on the same day at $23,180. When Bitcoin bounces over the coming days, bearish traders can watch for the crypto to print a bearish reversal candlestick below the $24,400 level to indicate the downtrend will continue.
- A bounce is likely to come soon because Bitcoin’s plunge dropped the relative strength index (RSI) sharply to the downside. Bitcoin’s RSI is measuring in at about 35% and when the oscillator nears or reaches the 30% level, it becomes oversold, which can be a buy signal for technical traders.
- Bitcoin has resistance above at $22,729 and $24,206 and support below at $21,313 and $19,915.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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