Bitcoin Faces Minor Price Retreat Amid Increasing Bull Exhaustion

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• Bitcoin created a doji candle yesterday, signaling buyer exhaustion near the crucial 21-week moving average (MA) resistance at $4,073. As a result, a price pullback could be in the offing in the next 24 hours.
• A break below $3,930 (flag support on 4-hour chart) would further strengthen the case for a pullback and expose support levels lined up at $3,890 and $3,755.
• The doji candle would be invalidated if prices find acceptance above $4,000 in the next few hours, confirming a bull flag breakout on the 4-hour chart. That could yield a rally to the bearish lower high of $4,236 created on Dec. 24.
• Any gains above the 21-week simple moving average of $4,073 will likely be transient, though, as long as that average is sloping downwards.

Bitcoin BTC$87,710.50 is showing signs of buyer exhaustion and could see a minor pullback unless resistance at $4,000 is scaled in the next few hours.

The crypto market leader witnessed two-way business yesterday before closing (UTC) on a flat note at $3,969 on Bitstamp. Essentially, BTC created a doji candle, which is widely considered a sign of indecision in the marketplace.

Notably, the fact that the doji candle has appeared close to the historically strong resistance of the 21-week simple moving average (SMA), currently at $4,073, suggests the indecision is predominantly among the bulls and could be considered a sign of buyer exhaustion.

So, a price pullback could be on the way, especially if support at $3,930 is breached in the next few hours. That said, the rally from the March 14 low of $3,775 could resume if prices rise above the resistance at $4,000, invalidating the doji candle.

As of writing, BTC is changing hands at $3,975, representing a 0.4 percent gain on a 24-hour basis.

Daily and weekly charts

On the daily chart, BTC looks to be creating the right shoulder of an inverse head-and-shoulders pattern, having bounced up from the rising trendline last week. The 5- and 10-day MAs are also trending north, indicating a bullish setup.

Even so, the rally has stalled near $4,000 and a doji candle has appeared, validating the bearish view put forward by the descending 21-week SMA, currently at $4,073.

BTC, therefore, risks falling back to the rising trendline support at $3,890. A break lower would expose the March 14 low of $3,775.

It's worth noting that bitcoin may have a tough time scaling or holding onto gains above the 21-week SMA as long as that average is trending south.

4-hour chart

As can be seen, BTC has created a minor bull flag – a continuation pattern that usually accelerates the preceding bullish move.

A break above the upper edge of the flag, currently at $4,000, would open the doors to $4,305 (target as per the measured move method)

However, the bullish exhaustion signaled by the doji candle would gain credence if prices fall below the flag support at $3,930. In that case, BTC will likely revisit key support levels at $3,890 and $3,755.

Disclosure: The author holds no cryptocurrency assets at the time of writing.

Bitcoin image

via Shutterstock; charts by Trading View