Yahoo Finance Support Forming? Why $7.9K Is Bitcoin's New Price to Watch
Bitcoin remains in a bullish territory for now and is looking at further gains, though a pullback is possible if support at $7,900 is breached, according to technical studies.
The cryptocurrency's first attempt to scale the long-term descending trendline (drawn from the Dec. 17 high and Jan. 6 high) failed on Monday and prices fell below $8,000 as expected at 12:00 UTC.
It's worth noting that the Bollinger bands (seen on the chart below) show the volatility dropped after BTC dipped below the psychological mark, likely signaling indecision among the bears. As a result, it is not surprising the dip below $8,000 was short-lived.
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As of writing, BTC is changing hands at $8,145 on Bitfinex, largely unchanged on a 24-hour basis, but could soon report further gains as the hourly Bollinger bands indicate scope for a retest of $8,400-$8,500.
Hourly chart
The Bollinger bands (+2 and -2 standard deviations from the 20-hour moving average) narrowed after the dip below $8,000, indicating the low volatility period - popularly known as a Bollinger band squeeze.
The 19-hour squeeze ended with a bullish breakout. Additionally, the hourly relative strength index (RSI) is above 50.00 and trending north, also indicating a bullish setup. So, BTC could have another attempt at breaching at the trendline resistance seen today at $8,420.
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However, a failure to capitalize on the bullish Bollinger breakout could yield a drop below $7,900 (previous day's low). In such a case, BTC will likely test 4-hour 200 MA lined up at $7,690.
That said, the outlook as per the daily chart still remains bullish.
Daily chart
Only a daily close below $7,510 (double-bottom neckline/former resistance turned support) would abort the bullish view.
Meanwhile, a dip to $7,690 will likely find bids as the short-term momentum studies are biased bullish. The 5-day MA and the 10-day MA continue to slope upwards (bullish).
View
Bitcoin could revisit the descending trendline resistance seen today at $8,420. A daily close (as per UTC) above that level would confirm a long-term bearish-to-bullish trend change.
On the downside, a move below $7,900 could yield a fruther drop to $7,690.
A daily close below $7,510 would signal the rally from the April 1 low of $6,425 has ended.
Bitcoin on rail via Shutterstock
