Bitcoin (BTC) has made a 6 percent recovery from the 90-day low hit on Wednesday, neutralizing the immediate bearish outlook.
The leading cryptocurrency fell to $6,108 at around 16:30 UTC yesterday on Bitfinex – its lowest level since February 6 – bolstering the already oversold conditions shown by the daily relative strength index (RSI) yesterday.
Hence, the subsequent recovery to $6,500 levels currently is hardly surprising and indicates that Bitcoin may have found a temporary bottom around $6,100. However, long-run technical setup remains bearish and the battered bulls will want to see a stronger evidence of bear exhaustion before hitting the market with fresh bids.
Consequently, the market could remain directionless over the next 48 hours and bargain hunters may chip in later if the cryptocurrency looks stable around $6,500.
While prices fell to $6,108 yesterday, the RSI created a higher low, signaling a bullish divergence.
So, the stage is set for a corrective rally, although the upside is seen gathering steam only if Bitcoin manages to hold above $6,425 (April 1 low) for next 24 hours. In this case, a move toward $7,000 becomes more of a possibility, or even as high as the falling channel resistance, currently located at $7,380.
That will be easier said than done, though, as the moving averages (MAs) are still biased bearish – the 50-candle, 100-candle and 200-candle MAs are all trending south, indicating a bearish setup.
The daily moving averages (5-day and 10-day) seen here are also pointing south, and the broader outlook remains bearish as long as Bitcoin is trapped inside the falling channel.
Currently, BTC is having a tough time crossing the 5-day MA, currently located at $6,857.
Bargain hunters will likely enter the market after the short-term moving averages have bottomed out.
While charts show early signs of bear exhaustion, the long-term outlook is still poor for the bulls, as indicated by the pennant breakdown and the bearish crossover between 5-month and 10-month MAs.
BTC seems to have made a temporary low at $6,109 and may trade sideways in the next 48 hours or so.
The probability of a corrective rally to $7,000 and above would rise if the price holds above $6,425 (April 1 low) for the next 24 hours.
Bearish scenario: Repeated failure to hold above $6,425 despite the bullish price RSI divergence (seen in 4-hour chart) could yield a drop to $6.000. A daily close (as per UTC) below that level would open up downside towards the $5,000 mark.
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