Bitcoin (BTC) is witnessing indecisive price action for the third day, with a break above Wednesday’s high of $12,145 needed to revive the bullish outlook.
The leading cryptocurrency is currently trading at $11,690 on Bitstamp, representing a 0.85 percent drop on the day.
Prices hit a high of $12,040 in the Asian trading hours before quickly falling back below the $12,000 mark. Today is the fourth straight day of bull failure above $12,000.
The cryptocurrency hit an intraday high of $12,325, $12,145 and $12,061 on Tuesday, Wednesday and Thursday, respectively only to print a UTC close below $12,000 on all three days.
Essentially, BTC has charted lower highs above $12,000 since Tuesday. At the same time, it has created higher lows in the last three days. That narrowing price range is a sign of indecision in the market place.
The consolidation could also be considered a sign of bullish exhaustion since it comes following a 35 percent price rise over eight days, as seen in the chart below.
Bitcoin picked up a bid near $9,100 and rose to a one-month high of $12,325 on Tuesday. Since then, the cryptocurrency has been restricted to a contracting price range, as represented by trendlines connecting lower highs and higher lows.
A break above $12,000 would confirm range breakout and pave way for a move toward $13,000.
BTC, however, could fall back to the former resistance-turned-support of $11,120 if the range is breached to the downside.
The relative strength index is reporting an inverse head-and-shoulders breakdown, a bearish reversal pattern. As a result, a range breakdown looks likely.
Bitcoin revived the bull market with a falling channel breakout on Wednesday. So far, however, the follow-through has been anything but bullish.
The cryptocurrency created a dragonfly doji yesterday, which occurs when the market trades down and then reverses to close largely unchanged on the day.
That candlestick pattern is widely considered an early warning of bearish reversal.
The daily chart also shows a “double inside bar pattern” – yesterday’s doji falls within Wednesday’s high and low and Wednesday’s candle is engulfed by Tuesday’s high and low.
Double inside bars indicate consolidation and lack of volatility. Trading volumes have also dropped over the last two days.
The pattern often paves the way for an explosive move on either side. A break above the high of the first inside bar is considered a sign of bullish breakout and a move below the low of the first inside bar’s low is taken as a bearish reversal signal.
So, the focus is on Wednesday’s high and low of $12,145 and $11,388.
A UTC close above $12,145 would signal a resumption of the rally from recent lows near $9,100 and open the doors to the bearish lower high of $13,200 created on July 10.
A UTC close below $11,388 would confirm the bearish reversal and shift risk in favor of a drop to $9,057 (July 17 low).