Bitcoin (BTC) risks falling to the key support level of $6,900, having failed to capitalize on signs of weakening bearish momentum yesterday.

The cryptocurrency’s technical charts saw a doji candle on Sunday, signaling short-term bearish exhaustion. However, a corrective rally remained elusive as bitcoin ran into offers above $7,400 and closed (as per UTC) at $7,143 – the lowest daily close since April 12, according to Bitfinex.

Prices continued to drop today, with bitcoin hitting a 7-week low of $7,040 this morning. At time of writing, the price was at $7,130.

The losses signal a continuation of the sell-off from the recent high of $9,990 and indicate scope for a drop to $6,900 – a level that the bulls need to defend at all cost. If they can’t, prices may go as low as $5,000.

Daily chart

BTC created a bearish outside-day candle on Monday. These occur when a high is above the previous day’s high and the low is below the previous day’s low. In simple terms, it means trading on Monday started with optimism and ended with pessimism.

The bearish outside-day usually indicates a bullish-to-bearish trend change. However, when viewed against the backdrop of Sunday’s doji candle, the bearish outside-day signals revival/continuation of the sell-off from the May 5 high of $9,990.

The above chart also shows the 5-day and 10-day moving averages (MA) are trending south in favor of the bears.

The relative strength index (RSI) has dropped to 30.00, indicating oversold conditions.

According to historical data, bitcoin climbs every time the RSI on the daily chart drops to or below 30.00. However, the historical pattern may not come into play this time, as BTC’s long-term technical studies have turned in favor of the bears.

For instance, the weekly RSI is below 50.00 (in the bearish territory). Further, BTC recently closed below the 50-week MA for the first time since 2015, adding credence to the argument the long-run bull market is over. Meanwhile, the 5-month and 10-month MAs are beginning to slope downwards in favor of the bears.

As a result, it’s likely that BTC will drop to $6,900 (triangle support) soon – although it may not happen in the next 24 hours as the short-duration chart shows a temporary bullish setup.

1-hour chart

BTC has created lower lows in the last 48 hours, but the RSI has not followed suit – a bullish divergence that indicates scope for a minor corrective rally.

View

BTC will likely drop to $6,900 (triangle support). This is the last line of defense for the bulls. A daily close (as per UTC) below $6,900 would open the doors to $5,400 (November 2017 low).

A minor corrective rally to $7,300 could be in the offing, but will likely be short-lived.

A break above the 50-week MA, currently seen at $7,702 would abort the bearish view.

Only a convincing move above $9,990 would signal a bearish-to-bullish trend change.

Bitcoin image via Shutterstock