Bitcoin Risks Deeper Drop After Shallow Price Bounce

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• Bitcoin risks revisiting Thursday's low of $7,072, having charted a shallow bounce in the last 24 hours.
• The three-day chart indicates scope for a deeper drop toward recent lows near $6,500.
• A climb to $7,400 cannot be ruled out if the newfound hourly chart resistance at $7,250 is breached with high volumes in the next few hours.
• The outlook will remain bearish as long as the lower high at $7,870 is intact.

Bitcoin is again looking weak, having charted a shallow bounce from two-week lows in the last 24 hours.

The cryptocurrency looked to have had potential to jump above $7,300 and possibly extend gains toward $7,500. After all, credible signs of seller exhaustion had emerged on the intraday technical charts following Thursday's drop to $7,072 – the lowest level since Nov. 24.

So far, however, the rebound has been anything but impressive. Bitcoin has faced rejection around $7,250 two times in the last 12 hours and is changing hands at around $7,200 on Bitstamp at press time.

The lackluster bounce indicates sentiment is still quite bearish. In fact, the intraday charts have now rolled back in favor of the sellers. Further, fresh bearish signs have emerged on longer durations, too, indicating scope for a slide to recent lows.

Hourly chart

The ascending channel breakdown seen on the hourly chart indicates the bounce from two-week lows has fizzled out and a fresh drop toward $7,072 and possibly to $7,000 may be in the offing.

The bearish case would strengthen further if the RSI violates the ascending trendline.

A convincing move above $7,250 could propel prices on to $7,400. That said, the outlook will remain bearish as long as prices are trading below the lower high of $7,870 created on Nov. 29.

3-day chart

Bitcoin created a bearish "outside bar" candlestick pattern in the three days to Dec. 11. Widely considered a sign of an impending sell-off, these candles occur when the period begins on a positive note but ends with pessimism, engulfing the preceding day's price action.

In BTC's case, the candle indicates the corrective bounce from $6,500 has ended and the bears have regained control. As a result, a fresh sell-off toward $6,500 could be seen.