Bitcoin bears may have had the upper hand in their fight with the bulls on Tuesday, although the positive price action seen today suggests the cryptocurrency is still on the hunt for $5,000 (all-time high) levels.
The bitcoin-U.S. dollar (BTC/USD) exchange rate clocked a fresh five-week high of $4,925 on Tuesday, but ended the session with marginal losses at $4,750.
The decline lacked clear catalysts, however. Techies may consider overbought conditions responsible for the retreat, while news traders may blame Putin's comments on cryptocurrency for stalling the rally at a time when record high was within touching distance.
But, whatever the reason, bitcoin's descend from $4,925 to $4,750 does call for caution. At press time, BTC is trading at $4,800 – up 0.20 percent on the day. Week-on-week and month-on-month, the cryptocurrency is up 14 percent.
Price action analysis suggests the broader outlook remains bullish unless prices end on a negative note today. In that event, a short-term bullish-to-bearish trend change would be confirmed.
The chart above shows:
- Doji-like candle signaling indecision in the market place
- Average true range (ATR) continues to drop, indicating the uptrend lacks momentum or low volatility.
A doji candlestick forms when a cryptocurrency's open and close are virtually equal. It forms due to indecision between the buyers and sellers and signals exhaustion.
The average true range essentially tracks the range of price movement in the cryptocurrency. It is considered a volatility indicator due to the fact that it measures the distance between a series of past highs and lows for a given period. A higher ATR means the move (bullish/bearish) has strong momentum or the cryptocurrency is volatile.
The falling ATR on the bitcoin daily chart indicates weak momentum and a choppy market.
- BTC could still test $5,000 as doji candles alone do not signal trend reversal.
- Bearish Scenario: a negative price action today would confirm bearish doji reversal and open doors for a pullback to $4,500 levels.
Bitcoin image via Shutterstock