Bitcoin Looks South After Strong Rejection Above $7,600

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  • Bitcoin risks falling to key support near $7,087 (Dec. 4) with charts indicating bearish sentiment is still quite strong.
  • Acceptance below $7,087 would open the doors for a re-test of recent lows near $6,500.
  • A high-volume move above $7,870 (Nov. 29 high) is needed to confirm a short-term bullish reversal.
Bitcoin is again operating on slippery ground, having faced repeated rejection above psychological resistance over the last four days.
The top cryptocurrency by market value has failed to hold onto gains above $7,600 in three out of the last four days. Prices remained below that level on Sunday.
Monday's rejection above the psychological level appeared most disheartening for the bulls. The cryptocurrency had jumped from $7,440 to $7,666 in the seven hours to 15:00 UTC, according to Bitstamp data.
The upward move, however, was undone with a $283 drop to $7,383 in the following 60 minutes. The cryptocurrency ended the day with a 2.4 percent drop, engulfing the trading range seen over the last three days.
That price action is reflective of the market sentiment, which is still quite bearish. So, a deeper drop toward $7,000 cannot be ruled out.
The cryptocurrency is already charting a bearish follow-through to Monday's move. At press time, bitcoin is changing hands at $7,330 on Bitstamp, having hit a low of $7,274 earlier today.
4-hour and hourly chart
Bitcoin has dived out of an ascending trendline (above left), confirming an end of the corrective bounce from the six-month low of $6,500 seen on Nov. 25.
The downside break is backed by a bearish below-50 reading on the relative strength index (RSI).
The bearish case would weaken if prices manage to rise above $7,666, invalidating the big red hourly candle with a long upper shadow created Monday.
Its worth noting that the selling volume (red bars) witnessed during that price drop was the highest since Nov. 27. So, any breakout above $7,666 needs to be backed by strong buying volume (green bars) to have staying power.
Daily chart
Bitcoin created a bearish "outside day" candle on Monday. These occur when the day begins with optimism but ends on a negative note, undoing or engulfing the preceding day's high and low.
Monday's outside day has engulfed the preceding three days' price action and invalidated an upside break of the descending trendline confirmed on Dec. 6. The 14-day RSI has also dropped through the ascending trendline.
All-in-all, the path of least resistance appears to be on the downside.
Bitcoin risks falling to support at $7,087 (low of Dec. 4's inverted bearish hammer) in the next 24 hours. A violation there would expose recent lows near $6,500.
On the higher side, a move above $7,870 (Nov. 29 high) is needed to invalidate lower-highs set up and confirm a short-term bullish reversal.