Bitcoin (BTC) has dropped significantly overnight – at one point by more than $6,000.
Technical indicators are slowly turning bearish, and the loss of the $32,700 support area would confirm that the bitcoin trend is bearish.
Weekly Bitcoin Outlook
Bitcoin rose considerably during the week of January 4-11, reaching an all-time high of $41,950, but the weekly candle had both long upper and lower wicks – a sign of indecision between sellers and buyers.
BTC started the current week with a bearish candle.
While the Bitcoin Supersplit is still rising, the RSI has started to fall – and the Stochastic Oscillator is about to form a bearish cross.
If a cross were to occur, it would be a very strong bearish sign, especially considering that weekly stochastics have been bullish throughout the bull run.
On the daily chart, we can see two support levels found at $32,700 and $28,400. BTC has already reached the first support and bounced, possibly creating a long lower wick as the daily candle has not yet closed.
Despite the bounce, technical indicators are gradually turning negative. The MACD has generated the first lower momentum bar in more than two weeks, and the RSI has broken below the 70 level. Moreover, the Stochastic oscillator is about to form a bearish cross.
The six-hour chart is more bullish as it shows both an ascending support line and a hidden bullish divergence in the RSI.
Since the support line coincides with the previously mentioned $32,700 support area, a break below it would be a strong bearish sign that could cause a decline towards $28,400.
However, as long as BTC trades above these two support lines, the possibility of a reversal remains.
The two-hour chart shows that there is no sign of a reversal yet, although the two-hour RSI is oversold.
Until BTC manages to break above certain levels (the 0.5 and 0.618 Fib retracement levels – $37.623 and $38.373, respectively), the trend cannot be considered bullish.
It is possible that Bitcoin (Go to Buy Bitcoin Guide) has started a downtrend that will lead it back to $28,400.
The loss of the current ascending support line and the $33,400 area would likely confirm this, while the recapture of $38,373 (0.618 Fib retracement level) could invalidate this scenario.