- Bitcoin may soon see solid support from the 21-month exponential moving average (currently at $7,097).
- Repeated defense of the EMA could attract technical buying. The average had acted as strong support in the five months to October 2018.
- A UTC close above $7,870 is needed to confirm a short-term bullish reversal.
- A violation at the EMA support could yield a re-test of recent lows near $6,500.
Bitcoin is still feeling bearish pressure and could soon drop to historically strong price support below $7,100.
The cryptocurrency fell 1.7 percent on Tuesday, reinforcing the bearish view put forward by the strong rejection above $7,600 witnessed over the weekend.
The longer term picture is also looking bleak. Bitcoin is currently down 48 percent from the June high of $13,880 and is reporting nearly a 13 percent drop on a quarter-to-date basis, according to Bitstamp data.
With the sellers in control, bitcoin looks set to re-test the 21-month exponential moving average (EMA), currently at $7,097. The EMA had acted as strong support in the five months to October 2018, as seen below.
Monthly chart (2017-2018)
Bitcoin’s sell-off from the record high of $20,000 reached in December 2017 ran out of steam at the 21-month EMA support in June 2018.
In the following four months, sellers repeatedly failed to secure a monthly close below the average line. By mid-October, many were convinced that the cryptocurrency had bottomed out along the key level.
Buyers, however, remained elusive and the average support, then located around $6,100, was convincingly breached in mid-November with high volumes. The violation of the support likely triggered stops on long positions, leading to a violent sell-off.
Clearly, the 21-month EMA, currently at $7,097, is the level to watch out for in the near-term – more so, as the bears have recently struggled to breach the support.
Monthly chart (2019)
The long-tail attached to October’s candle indicates sellers faded near the 21-month EMA line.
Prices did print lows below the crucial support last month, but the support remained intact on a monthly closing basis (Nov. 30, UTC).
December’s candle has already briefly defended the support. A week ago, the technical line held ground resulting in a price bounce that fizzled out at highs above $7,660 on Dec. 9.
If the EMA continues to restrict losses, chart-driven buying could be seen, leading to a notable price bounce.
That said, the short-term outlook will turn bullish only above $7,870. At press time, bitcoin is changing hands at $7,200 on Bitstamp.
Daily and weekly chart
A UTC close above the Nov. 29 high of $7,870 would invalidate the lower-highs setup on the daily chart (above left) and confirm a short-term bullish reversal.
However, the odds are currently stacked in favor of a move lower, as suggested by Monday’s “outside day” candle and Tuesday’s bearish follow-through.
A break below the 21-month EMA support at $7, 097 will likely yield a decline to recent lows near $6,500.
The long-term outlook would turn bullish if and when the cryptocurrency witnesses a falling channel breakout on the weekly chart.
Disclaimer Read More
The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.
This article is intended as a news item to inform our readers of various events and developments that affect, or that might in the future affect, the value of the cryptocurrency described above. The information contained herein is not intended to provide, and it does not provide, sufficient information to form the basis for an investment decision, and you should not rely on this information for that purpose. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.