Bitcoin recently made a sharp drop but has found support at the $5,200 area where bulls were likely waiting to buy on dips. This could spur a pullback to the broken long-term support around the $6,000 handle.
Applying the Fibonacci retracement tool on the latest swing high and low shows that the 61.8% level lines up with the broken support that might now hold as resistance. A smaller pullback could already find a ceiling at the 38.2% Fib or the $5,700 area or the 50% level at $5,870. If any of these inflection points hold, Bitcoin could resume the drop to the swing low or lower.
The 100 SMA is below the longer-term 200 SMA to indicate that the path of least resistance is to the downside. In other words, the selloff is more likely to resume than to reverse. In addition, the gap between the two is widening to reflect stronger selling pressure. The moving averages are also close to the area of interest to add to its strength as a ceiling.
RSI is pulling up after reaching oversold territory, though, indicating that buyers are ready to return and push Bitcoin price higher. Stochastic is also making its way out of the oversold region to reflect a pickup in bullish pressure. Then again, once both oscillators reach overbought levels around the times the Fibs are tested, sellers might return there.
Bitcoin is still on shaky footing as the “civil war” related to the Bitcoin Cash hard fork is keeping the entire industry on edge. Understandably a lot of retail and institutional traders took money off the table leading up to the split and the lack of consensus has contributed to the prevailing FUD sentiment.
Analysts have also warned that it could take months to undo the latest slide, which has dragged Bitcoin down to its yearly lows. Further declines at this point could encourage more sellers to join in.
Images courtesy of TradingViewTags: bitcoin, BTC, BTC/USD
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