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A technical sell signal is about to appear on the Bitcoin (BTC) daily chart.
On December 18, the price of BTC will experience a deadly cross, a market indicator that occurs when a short-term moving average drops below a long-term moving average. In this case, Bitcoin’s 20-day exponential moving average (20-day EMA) will close below its 200-day exponential moving average (200-day EMA).
The indicator may end up alerting traders and investors of a potential sell-off in the coming sessions, given its history of predicting bearish trends in advance. For example, the 20-200 bearish cross that appeared on May 30, 2021 helped push the price of BTC down from $ 36,500 to $ 28,800 over the next 24 days.
BTC / USD daily price chart with the death cross of May 2021. Source: TradingView
A similar death also surfaced during the market crash triggered by the March 2020 pandemic, exactly one day before the price of Bitcoin fell from nearly $ 8,000 to below $ 4,000.
Daily BTC / USD price chart with the March 2020 Death Cross. Source: TradingViewBitcoin May Correct Into $ 40,000- $ 42,000 Range
Bitcoin has corrected consecutively over the past four weeks and looks set to close the current weekly session in losses as well, mainly with the Federal Reserve taking more aggressive action against inflation.
Over the past 30 days, the price of BTC has fallen nearly 17.50%, including a correction from its all-time high of $ 69,000 on November 10. In doing so, the cryptocurrency briefly fell to $ 42,333, only to rebound sharply later, reducing some losses. , as shown in the table below.
BTC / USD Daily Price Table. Source: TradingView
Nonetheless, the rebound did not turn into a bullish reversal – the price of Bitcoin tended to decline after finding provisional resistance near $ 50,000, a psychological level.
Bitcoin’s efforts to retest $ 50,000 for a bullish breakout face opposition from the resistance trendline of its descending channel, combined with further bearish pressure from its 20-day EMA and 200-day EMA waves, which also come in at nearly $ 50,000.
Related: Bitcoin Bears Running Out Of ‘Balls’ To Keep Selling Until 2022 – Analyst
As a result, the path of least resistance for Bitcoin appears to the downside. And with the imminent death of the cross, the cryptocurrency would likely continue to trend inside the descending channel to test levels around $ 42,000 for a strong pullback movement.
If the decline accelerates, the price could consider $ 40,000 as a downside target.
The RSI factor
Another lower leg would also push Bitcoin’s Daily Relative Strength Index (RSI) into its oversold territory below 30, a buy signal. For now, the momentum indicator has attempted to break above its descending trendline, a move that previously predicted bitcoin’s local price bottom.
Daily BTC / USD price chart with RSI breakouts. Source: TradingView
On a shorter-term chart, the RSI consolidated sideways, anticipating that it would break out of the rectangular range to the upside. At the heart of this optimistic outlook is a September 2021 fractal, shared by Mozzi, an independent cryptocurrency analyst.
Four-hour BTC / USD chart comparing RSI trends from September 2021 to December 2021. Source: TradingView
“Bitcoin follows a similar structure from the end of September,” the analyst noted on Saturday.
“Notice the consolidation of the RSI. Expect a clear breakout of the upper trendline as confirmation. “
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move comes with risk, you should do your own research before making a decision.
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