Bitcoin Breaks Through Support As Stocks Go South

Bitcoin Breaks Through Support As Stocks Go South

Bitcoin (BTC) has dropped out of the tight trading range seen recently, paralleling losses in the U.S. stock markets.

The leading cryptocurrency, which was trapped in a triangle pattern (narrowing range) above $6,400 yesterday, looked set for a breakout.

However, the bullish technical setup failed and BTC found acceptance below the triangle support of $6,430 at 17:30 yesterday, possibly due to risk aversion in the U.S. equities – the S&P 500 opened on a negative note Thursday and closed with a 1.4 percent loss.

That argument has merit as bitcoin and the S&P have correlated on and off for almost a year, each taking turns as the leading indicator. Of late, the S&P 500 index has been leading the BTC market by 12 hours or more.

At press time, BTC is changing hands at $6,380 on Coinbase, representing a 1.19 percent drop on a 24-hour basis.

The triangle breakdown witnessed yesterday may have emboldened the bears. So far, however, the downside has been restricted around $6,350

As seen in the above chart, the 50-, 100-, and 200-hour exponential moving averages (EMAs) have turned lower in favor of the bears following the range breakdown.

Further, the stacking order of the 50-hour EMA below the 100-hour EMA, below the 200-hour EMA is a classic bear signal.

Therefore, a drop to $6,230 could be in the offing.

The above charts show:

If the index finds acceptance below the 200-day MA, then the risk aversion will likely worsen and that could push BTC below the all-important level of $6,000.

So, it seems safe to say that $6,000 and the 200-day MA line on S&P 500 are key levels to watch out for in the near-term.

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

Bitcoin image via Shutterstock; charts by Trading View 

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