Long-Term Support Level May Struggle to Revive Bitcoin Price Rally

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• Bitcoin is again attempting a recovery from the 30-day moving average, currently at $7,710. The key average has consistently reversed price pullbacks in the last four months.
• This time, BTC is more likely to end up creating a bearish lower high (shallow bounce) or may find acceptance below the average in the next day or two, as both the daily and weekly technical indicators are calling a deeper price pullback.
• A UTC close below the 30-day MA would open the doors to $7,000.
• If the ongoing recovery from the MA ends with a UTC close above $8,103 (today’s high), BTC may rise to $8,500 in the next couple of days.

Bitcoin’s BTC$89,557.83 price pullback seems to have stalled near historically strong support, but a bounce, if any, could be shallow.

The cryptocurrency market leader dived below $8,000 in the Asian trading hours today and almost tested the crucial 30-day moving average (MA) support, currently at $7,707, according to Bitstamp data.

As of writing, BTC is changing hands at $7,940, representing a 5 percent drop on the day, having hit a low of $7,932 earlier today.

The minor recovery from levels near the 30-day MA is hardly surprising and could be extended further. After all, the average has consistently reversed price pullbacks over the last four months.

This time, however, BTC, may not be able to rise all the way back to $9,000, as the short duration technical charts are biased bearish and the weekly chart is flashing signs of buyer exhaustion, as discussed yesterday.

Further, the broader market is also looking exhausted. Notably, LTC$80.57 is struggling to decouple from BTC with a move higher, even though it is set to undergo mining reward halving in August. The supply altering event tends to put a bid under the cryptocurrency months in advance.

Daily chart

BTC breached the 30-day MA on Feb. 8 and has established multiple bullish higher lows (marked by arrows) along that line ever since. Notably, every bounce ended up violating the preceding price high.

The price is again attempting a recovery from the 30-day MA as seen above. However, the bounce will likely be shallow or the cryptocurrency could find acceptance below the average later today, as the 14-day relative strength index (RSI) has dipped below 54.50, confirming a double top breakdown – a bearish reversal pattern.

The moving average convergence divergence (MACD) histogram is charting bigger bars below the zero line – a sign the bearish move is gathering strength.

Further, the price drop seen in the last 24 hours validated the bullish-to-bearish trend change signaled by the bearish outside day candle created on May 30.

Weekly chart

The doji candle created last week represents buyer exhaustion. The 14-week RSI is also reporting overbought conditions with an above-70 print.

Meanwhile, the money flow index – also known as volume-weighted RSI – has almost risen to 100 for the first time on record. A reading above 80 represents overbought conditions.

The current print of 98, therefore, indicates the recent rally is extremely overstretched and significant correction is overdue.

Disclosure: The author holds no cryptocurrency assets at the time of writing.

Bitcoin image via Shutterstock; charts by Trading View