Bitcoin Analysis: Doji candle seen, selling likely to gather pace below $4190

Bitcoin Analysis: Doji candle seen, selling likely to gather pace below $4190

Bitcoin [BTC] clocked a fresh session high of $4464 yesterday before falling back to $4200 levels. The price action confirmed a bearish RSI divergence on the 4-hour chart, although the downside in the currency pair has been capped just above $4181- which is 161.8% Fib extension of $1842.70-$2946.01-$2398.01.

Technicals

Daily chart - Bull market exhaustion

Yesterday’s Doji candle coupled with the overbought 14-day RSI signals bull market exhaustion. Note that the Doji candle alone does not confirm trend reversal… nor does the overbought RSI. What we need here is a bearish follow through i.e. a negative price action today would add credence to the Doji candle and the overbought RSI and shall confirm the bearish trend reversal. Let us drill down to the 4-hour chart, which shows the profit taking could gather pace below $4190 levels.

4-hour chart

Observations

• Bearish price RSI divergence
• Rising channel - resistance at around $4650, support around $4284
• Head and shoulders pattern on the RSI

Bearish divergence followed by a downside break of the rising channel indicates scope for a sell-off; however, the downside is being capped around $4190.

View:

• Selling is seen gathering pace once prices breach support at $4190. Such a move would also yield a head and shoulders breakdown on the RSI, in which case the support at $3837 [4-hour 100-MA] could be put to test.
• A bearish price action today would confirm the trend reversal on the daily chart and open doors for $3500 levels.
• Bullish scenario: Rebound from $4190 if yields a break above $4464 would open up upside towards rising channel resistance seen around $4650 levels.

Read: Bitcoin Analysis: Satoshi Cycle nears end