It took bitcoin less than 6 days to plunge from $9,000 to $4,000 but only a 71% recovery has taken more than 14 days. Due to the formation of a bearish pattern in combination with bearish divergence, nearly 20% of the recovery so far will be eliminated.
- After facing resistance at $6,888 bitcoin has failed to breach it. Hence, the downtrend has begun.
- Further downtrend to $5,500 can be expected in the coming week or so.
- A total drop of 20% can be observed, however, there are chances of a stop at 12% too.
Bitcoin’s Four Hour Chart
At the time of writing, the price of bitcoin at $6619 was at the end of a rising wedge and was near a massive resistance too. In combination, these factors might be the reason bitcoin starts its downtrend.
As mentioned in earlier articles, a rising wedge has a bearish breakout majority of the time. Hence, the breakout is already in favour of the bears. Further, scoping the resistance levels indicates an initial resistance at $6,370, following this, two more can be found at $6,125 and $5,835.
Looking at the relative strength index, it is clear that there has been a formation of divergence with the price since March 20. Since the RSI is trend down while the price is trending higher, this type of divergence is considered as a bearish divergence. This implies that the price will stop trending higher and collapse with the RSI eventually.
Hence, there are chances of the price of bitcoin might dip lower than $5,835. From its value at the time of writing, there is a chance that price might dip as low as $5,420, which also happens to be the POC (Point of Control) for the visible range indicator. POC is the level where most of the trading, for the visible range, has taken place, and hence this will act as a major support/resistance level relative to the price.
Further, the VPVR indicator showed that a lot of selling (yellow bars) took place at the POC as compared to buying (blue bars). At the time of writing, POC will bitcoin’s last line of support. Hence, from its current price, the drop to $5,420 will be an approximate 20% drop.