Bitcoin drops in price despite the oversold conditions signaled on the technical charts for the last six days.
The leading cryptocurrency by market capitalization fell to $4,200 soon before press time – a price low not seen since Oct. 5, 2017 – and was last seen trading at $4,484, according to CoinDesk’s Bitcoin Price Index (BPI).
Notably, the 14 percent drop witnessed in the last 24 hours has pushed the widely followed 14-day relative strength index (RSI) below 10.00, its lowest reading on record. An asset is considered to be oversold and due for a corrective bounce when its RSI is below 30.00.
BTC’s RSI fell into oversold territory on Nov. 14, but a strong recovery rally has still not materialized. That said, a corrective bounce might be seen in the next 24 hours or so, as the low on the RSI is backed by a rise in BTC/USD longs.
As seen above, BTC has dropped 34 percent in the last five days, despite being so oversold.
The cryptocurrency’s inability to produce a notable recovery rally in such conditions could be considered a sign that bearish sentiment is currently very strong. Still, the bears should exercise caution in the next 24 hours.
BTC/USD Longs on Bitfinex
As seen above, long positions hit a 3.5-month high of 31,719 earlier today, having risen 34 percent in the last six days – both of which indicate that investors are buying the current dip.
A corrective bounce, if any, will likely be short-lived as both descending triangle breakdown and the break of the seven-year-long rising trendline has likely set the tone for a drop to $4,100 (trendline connecting the January 2015 and April 2017 lows.)
- The record low reading on the RSI and the steady rise in long positions indicates scope for a minor bounce, possibly to the descending 5-day EMA, currently at $5,050.
- The weekly chart continues to favor a drop to the long-term rising trendline support of $4,100.
- The immediate bearish outlook would be invalidated if a correction ends up pushing prices above the 10-day EMA of $5,424.
Disclosure: The author holds no cryptocurrency assets at the time of writing.