Bitcoin’s (BTC) price has seen a $250 drop this morning from Tuesday’s two-month highs and may be headed for a deeper correction, technical charts suggest.
As of writing, the premier cryptocurrency is trading at $8,220 on Bitfinex down 3.5 percent from the high of $8,507 reached yesterday.
The correction is not surprising and could be extended further as BTC’s 40 percent rally from the seven-month low of $5,755 reached on June 24 is looking overstretched, as per the relative strength index (RSI).
The short duration charts have also aligned in favor of a deeper correction.
However, the bullish reversal has likely revved up investor interest in BTC. Hence, bargain hunters or investors who missed the bus last week could step in at the following key support levels.
The 50-hour, 100-hour, and 200-hour moving averages (MAs) are trending north and are located one above the other, indicating the path of least resistance is to the upside. Consequently, these MAs could be the area of interest of the bargain hunter.
As of writing, the 50-hour MA is located at $8,023.
Meanwhile, the 100-hour MA, currently located at $7,736, almost coincides with the rising trendline, thus dip demand could be strong around that level.
The rising (bullish) 5-day MA and 10-day MA are located at $7,830 and $7,538, respectively. The 100-day MA, which acted as a stiff resistance last week, is seen offering strong support at $7,612.
Clearly, the area between the $7,830 and $7,530 is packed with key moving average lines.
BTC is feeling the pull of gravity, courtesy of overbought conditions and a bearish RSI divergence on the hourly chart.
Bargain hunters could hit the markets with fresh bids around $8,023 (50-hour MA). A violation there would allow a retreat to the strong support zone of $7,530 – $7,830.
Should a strong dip demand emerges around the above discussed key levels, then BTC could cross the all-important 200-day MA hurdle of $8,633 in a convincing manner.
The short-term outlook remains bullish as long as the 5-day and 10-day MAs are rising.
Disclosure: The author holds no cryptocurrency assets at the time of writing.
Bitcoin image via Shutterstock; Charts by Trading View