Bitcoin’s failed bull move on Sunday has left the doors open for the bears to make a comeback.
The inverse head-and-shoulders breakout on May 20 signaled a short-term bullish reversal that could have seen bitcoin rise to $9,000 (target as per the measured height method).
However, the bulls ran out of steam at a high of $8,644 yesterday and prices had fallen back to $8,240 at time of writing – a drop of 2.8 percent over the last 24 hours, according to Bitfinex.
The decline did not come as a surprise, though, given the breakout lacked volume support, and a drop to $8,000 could now be on the cards.
As seen in the chart above, BTC fell back below the inverse head-and-shoulders neckline yesterday, weakening the bulls and has established a lower-high and lower-low pattern (bearish setup).
While a failed breakout usually indicates a bigger-picture bearish reversal, in this case it means the corrective rally from the low of $7,925 has ended and the sell-off from the May 5 high of $9,990 has resumed. Thus, prices could drop below the immediate support of $8,207 (50 percent Fibonacci retracement) seen in the daily chart below.
A break below $8,207 (50 percent Fibonacci retracement) would bolster the bearish setup seen in the hourly chart and would allow a drop to $8,000.
Note, though, that the 5-day and 10-day moving averages are beginning to curl upwards, so if the price moves above $8,408 (daily high), the bulls could make a comeback.
BTC looks set to take out support at $8,207 and drop to $8,000 in the next 24 hours.
A daily close (as per UTC) below $8,000 would signal a revival of the sell-off from the May 5 high of $9,990. In such a case, bitcoin could suffer a deeper sell-off towards $7,500.
On the higher side, a move above $8,408 would open the doors to $8,858 (100-day moving average).
A daily close above that level would signal a bullish trend reversal and could yield rally to $10,000.