Bitcoin appears to have run out of steam on its climb as it starts to correct from the recent rally. Applying the Fibonacci retracement tool shows the nearby support zones where bulls might be waiting.

The 100 SMA is still above the longer-term 200 SMA to confirm that the path of least resistance is to the upside or that the uptrend is more likely to gain traction than to reverse. The gap between the moving averages is widening to reflect increased bullish momentum, but the price has fallen below the 100 SMA dynamic support as an early indication of bearish pressure.

Price is closing in on the 38.2% Fibonacci retracement level around $4,885 but might still have enough downside momentum to test the 61.8% level around $4,500. A larger retracement could last until the area of interest at $4,200 or the former resistance area and 200 SMA dynamic support.

RSI is pointing down to show that sellers have the upper hand and could keep the correction going for a while. After all, this oscillator has a bit of room to head south before reaching the oversold region. Stochastic is also heading lower without even hitting the overbought level, indicating that sellers are eager to return.

Bitcoin’s recent drop from the rally isn’t much of a surprise for many as the slow move that followed the sharp climb signaled a loss of momentum. Volumes did not pick up as many had expected, which is likely why profit-taking is happening swiftly.

Still, there’s the possibility that bullish momentum could return if buyers continue to defend short-term correction levels. A break below $4,000 could signal that selling pressure is much stronger and that a larger correction or perhaps selloff might follow.

Many analysts are pointing to a technical pattern that suggests a bigger rally to the $5,800 level might follow.

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