Bitcoin – Broken Channel Challenges the Bullish Outlook

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Bitcoin - Broken Channel Challenges the Bullish Outlook

It was a quiet day in the currency markets, but the cryptocurrency market saw some rumbling. Bitcoin retreated from 243 to almost 236 by the end of the 5/25 session.

Bitcoin (BTCUSD) 1H Chart 5/26
bitcoin 1h chart 5/26
(click to enlarge)

The 1H chart shows that price has broken below the 100-, and 50-hour SMAs as well as a rising trendline. The RSI also tagged 30 which shows initiation of bullish momentum.

The bullish outlook that started last week is now being challenged. Now, if we see a pullback, monitor the 240 area. A hold below 240 would show that the bearish breakout is legit. Then we should see if price can break below 235 . If both events occur (break below 235 and a hold below 240 on a pullback), then we are likely going to see a reversal towards the 229 low from last week.

Bitcoin (BTCUSD) 4H Chart 5/26
bitcoin 4h chart 5/26
(click to enlarge)
The 4H chart shows a market that is anchoring into a bullish trend. However a bullish market needs to see price hold above 235, where the 200-period SMA resides. Also, the 4H RSI should hold above 40 in the bullish scenario.

Now, the market might be struggling to put on a bullish outlook, but the bearish outlook should be shelved until a break below the 229 handle. In that scenario, there would be downside risk towards the 214 low from April.

Bitcoin (BTCUSD) Daily Chart 5/26
bitcoin daily chart 5/26
(click to enlarge)

From the daily chart, we can see bitcoin shifting from a bearish mode into a sideways one. This means if price does break below 235, the downside risk is not only towards the 214 low, but the 200 handle and the 166 low on the year.

To the upside, a break back above 240 would first test the 250 resistance before opening up the 305-315 resistance area from January.

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