A technical sell signal is about to appear on the Bitcoin daily chart (BTC).
On December 18, the price of BTC will witness a death cross, a market indicator that emerges when a short-term moving average crosses down a long-term moving average. In this case, Bitcoin’s 20-day EMA will plot a close below its 200-day EMA.
The indicator could warn traders and investors of a potential sell-off in the coming sessions, considering its track record in anticipating bearish trends. For example, the bearish cross between the 20-day and 200-day EMAs that appeared on May 30, 2021 was instrumental in the collapse in the price of BTC from $ 36,500 to $ 28,800 in the following 24 days.
A similar death cross emerged during the market crash due to the pandemic in March 2020, exactly a day before Bitcoin’s price plummeted from nearly $ 8,000 to under $ 4,000.
Bitcoin risks correction towards the $ 40,000-$ 42,000 range
Over the past four weeks, Bitcoin has seen consecutive corrections and looks set to close the current weekly session at a loss, mainly due to more aggressive measures on inflation by the Federal Reserve.
Over the past 30 days, the price of BTC has dropped nearly 17.50%, following a correction from its own all-time high of $ 69,000 touched on 10 November. The cryptocurrency briefly hit $ 42,333 and rebounded sharply to higher levels, as shown in the following chart.
However, the rebound did not turn into a bullish recovery. Bitcoin’s price continues to show weakness after finding temporary resistance at the all-important psychological level of $ 50,000.
The Bitcoin attacks at $ 50,000 for a bullish breakout they face opposition from the upper boundary of a downtrend channel, combined with additional bearish pressure from the 20 and 200-day EMAs currently near $ 50,000.
Related: Analyst: The bears will not continue to sell Bitcoin until 2022
Therefore, the path of least resistance for Bitcoin appears to be to the downside. With the death cross looming, the cryptocurrency will likely continue to move in the descending channel until it tests levels close to $ 42,000 for a strong pullback.
Should the decline accelerate, the price could point to $ 40,000 as the next target.
The RSI factor
Another contraction would also push Bitcoin’s daily relative strength index (RSI) into oversold territory below 30, offering a buy signal. For now, the momentum indicator is trying to break a bearish trend line that it has in the past anticipated local Bitcoin lows.
On the 4-hour chart, the RSI is consolidating sideways, anticipating an upward breakout from the range. At the heart of this optimistic view lies a fractal from September 2021 shared by independent crypto analyst Mozzi.
“Bitcoin is following a similar structure to that recorded in late September,” commented Saturday the analyst.
“Look at the consolidation of the RSI. I am waiting for a clear breakout from the upper boundary as confirmation.”
The ideas and opinions expressed in this article belong solely to the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading operation involves risk. You should conduct your own research when making a decision.
–
