After days of rally, gravity is finally catching up with Bitcoin. So, is this dip a buying opportunity or can it fall further?
We were correct in avoiding a long position in Bitcoin around the $6000 mark. Though intraday the digital currency broke out of the ascending channel, it could not close above it.
Currently, the cryptocurrency is finding support just above $5500 levels. If the fall continues, Bitcoin can correct to the 20-day exponential moving average (EMA), which presently lies at $5359. The trendline support is also close to this level. Therefore, we expect the digital currency to bounce from this support zone of $5350 to $5500.
On the upside, the resistance line of the ascending channel will act as a major hurdle. A breakout of this will clear the path for a bigger rally.
However, the RSI is forming a negative divergence. The previous two negative divergences were followed by a sharp drop in prices. Additionally, we don’t find a reliable buy set up with a good risk to reward ratio.
Therefore, we don’t recommend any trade on Bitcoin.