Bitcoin (BTC) fell below the $7,000 mark on Wednesday, neutralizing the immediate bullish outlook.

More worryingly for the bulls, a further decline towards $6,425 (recent low) would turn the tide in favor of the bears, the technical charts indicate.

The cryptocurrency witnessed a head-and-shoulders breakdown at 09:00 UTC yesterday and fell to $7,000 (target as per the measured height method). The hourly momentum studies (moving averages) were aligned for a bullish move at the time, hence BTC was expected to defend the psychological mark.

However, the sell-off gathered pace early in the U.S. session, pushing BTC down to a low of $6,670, according to Bitfinex data. Interestingly, the drop in BTC prices coincided with a 500 point sell-off in S&P 500 futures.

Since late February, bitcoin and U.S. stocks have been moving more or less in tandem, indicating the cryptocurrency is still being perceived as a risk asset.

By the day’s end, U.S. stocks had turned positive, yet bitcoin fell further to $6,565 in the Asian hours before regaining some poise. As of writing, BTC is changing hands at $6,847 on Bitfinex.

While the retreat to $6,565 has turned the tide away from the bulls, all is not lost. A close today (as per UTC) above the 10-day moving average would still boost the odds of an upside break of the falling channel (seen chart below).

Daily chart

The 5-day moving average (MA) is flatlined (neutral) and the 10-day MA is biased to the bears (sloping downwards).

A close above the 10-day MA, currently seen at $7,148, would signal the sell-off from $11,700 (March 5 high) has ended at $6,425 (April 1 low) and will likely yield a bullish falling channel breakout.

The channel resistance is seen sloping downwards to $6,600 in the next 24 hours. An upside break of the falling channel would confirm the short-term bullish trend reversal.

View

The immediate outlook is neutral.

A close above the 10-day MA may result in a bullish falling channel breakout.

A break below $6,425 (April low) could yield a drop below $6,000 (February low).

A further drop towards the falling channel support of $5,450 cannot be ruled out, as the daily relative strength index shows sufficient room for another $1,000 drop in prices.

Chart image via Shutterstock