Bitcoin (BTC) is being squeezed in a tight trading range, signaling a tug of war between the bulls and the bears, and the breakout will likely set the tone for the next move in the cryptocurrency.
At press time, BTC is changing hands at $6,320 on Bitfinex, representing a 0.5 percent gain on a 24-hour basis.
The $1,000 drop witnessed during a 24-hour period in the middle of the last week titled the tide in favor of the bears. As a result, the cryptocurrency was facing a risk of a drop to $6,000 over the weekend.
But the sell-off unexpectedly ran out of steam at a low of $6,119 on Saturday. More importantly, the cryptocurrency has printed higher price lows in the last four days, signaling a bearish exhaustion.
Meanwhile, the bulls have not been able to do much either, as indicated by the lower price highs around $6,400. So, it seems safe to say that the investor community is evenly split on the immediate prospects of the bitcoin market, leaving the cryptocurrency directionless.
That said, the direction of the range breakout will likely play a big role in determining the short-term trend in BTC.
As can be seen, BTC is being squeezed between the two lines representing lower highs and higher lows. In technical parlance, this narrowing price range is referred to as the “symmetrical triangle”.
A downside break would add credence to the bearish pennant breakdown seen in the line chart and the rising wedge breakdown seen in the candlestick chart and open the doors to a drop below $6,000 (February low).
On the other hand, an upside break of the symmetrical triangle could allow a stronger corrective rally towards the 10-day moving average (MA), currently located at $6,660.
As seen in the above chart, the 5-day and 10-day MAs are trending south, indicating a bearish setup. Further, the bears must be feeling emboldened, having witnessed a rising wedge breakdown on Sep. 5.
As a result, the cryptocurrency is more likely to witness a downside break of the symmetrical triangle on the hourly chart.
- The violation of the narrowing price range on the hourly chart will likely set the tone for the next move in BTC.
- A break below $6,260 (lower end of the symmetrical triangle) would bolster the already bearish technical setup and open up downside towards $6,000 (February low).
- A move above $6,375 (upper end of the triangle) would allow a corrective rally to the 10-day MA of $6,660, although, the sustainability of gains is under question, as the MA is trending south.
Disclosure: The author holds no cryptocurrency assets at the time of writing.