Bitcoin Price Consolidation Continues, Downside Break Looks Likely

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• Bitcoin's current trading range of $3,920–$4,055 could be breached to the downside, as last week's doji candle created at the key 21- week moving average resistance is signaling bullish exhaustion.
• A downside break of the trading range, if confirmed, could yield a sell-off toward the support levels lined up at $3,775 and $3,658.
• On the higher side, a UTC close above $4,055 is needed to put the bulls back into the driver's seat, although that looks unlikely at press time.

Chart signals of bullish exhaustion suggest bitcoin's BTC$89,486.68 narrowing trading range could soon be breached to the downside.

The leading cryptocurrency by market value is sidelined below $4,000 for the fourth straight day, and has been restricted to the narrow range of $3,920–$4,055 since March 17, according to Bitstamp data.

More importantly, prices clocked a high and low of $4,055 and $3,920, respectively, last week before closing Sunday (UTC) largely unchanged at $3,970. The price swing formed what’s termed a doji candle on the weekly chart, which is usually taken to represent indecision in the marketplace.

The candle, however, has appeared following a 20 percent rally from lows near $3,300 seen at the end of January. So, it could be argued that the indecision, as represented by the doji, is predominantly among the buyers.

As a result, the probability of BTC ending the ongoing consolidation with a convincing break below $3,920 appears high.

As of writing, BTC is trading at $3,970 on Bitstamp, largely changed on a 24-hour basis.

Weekly chart

As seen above, BTC created a doji candle at the crucial 21-week moving average (MA) resistance, validating the bearish view put forward by that still-downward sloping momentum indicator.

The case for the downside break of the $3,920–$4,055 trading range looks stronger if we take into account the price action seen over the last five weeks.

To start with, BTC hit a high of $4,190 and created a bullish inverted hammer candle in the third week of February – a sign the market is bottoming out. That candlestick is usually followed by a quick move to the higher side.

In the last four weeks, however, BTC has failed to again challenge $4,190, weakening the bullish case.

Daily and 4-hour charts

On the daily chart, the short-term MA studies are now biased toward the bears, with the 5-day MA having dropped below the 10-day MA. Further, with the price well below the March 21 high of $4,055, the bearish outside-reversal candle created on that day is still valid.

So, the sideways channel seen in the 4-hour chart could be breached to the downside in the next day or two.

A range breakdown if confirmed would open the doors for a deeper drop toward $3,658 (Feb. 27 low).

A UTC close well above $4,055 would revive the short-term bullish view and could yield a rally toward $4,200, although gains may be short-lived, as the 21-week MA is still trending south.

Bitcoin image

via Shutterstock; charts by Trading View