As of writing, bitcoin is changing hands at $7,449 on Bitfinex, having dropped below the 50-week MA on May 23.
As seen on the chart above, the long-term moving average had acted as a strong support in the first quarter. BTC found strong bids in mid April following the repeated failure (marked by a circle) on the part of the bears to penetrate the 50-week MA.
Subsequently, the rally from the 50-week MA to $9,990 (May 5 high) reinforced the moving average as a strong long-term support. Hence, a downside break would raise the odds of a slide to fresh 2017 lows below $6,000.
Looking ahead, price chart analysis suggests that bitcoin is likely to end the week below the key $7,611 level.
To start with, the weekly relative strength index (RSI) is below 50.00 (in the bearish territory) and trending south in favor of the bears.
The RSI has also found acceptance below the key support zone of 53.55–55.00, which only strengthens the bear case.
Meanwhile, the daily chart below also shows scope for a drop below $7,000. The bears currently have the upper hand, as indicated by the lower highs and lower lows pattern, downside break of the channel, downward sloping (bearish) 5-day and 10-day MAs.
The RSI is holding below 50.00 (in the bearish territory), but well above 30.00 (oversold region), indicating room for sell-off to $6,870 (triangle support).
Despite the bullish price RSI divergence on the hourly chart, BTC failed to cross the falling trendline hurdle, underscoring the strong bearish sentiment in the market.
View
– BTC looks set to close below the 50-week MA (at $7,611) for the first time since October 2015, signaling a major bearish breakdown and opening the doors for a re-test of $6,000 (2018 low).
– A corrective rally may save the day for the bulls, however, the probability of a bearish weekly close below the 50-week MA will remain high as long as bitcoin is trading below $8,644 (May 21 high).
