Bitcoin Makes New Low at $59K: Relief Rally Kicking In or Dead Cat Bounce?

The Bitcoin price fell out of a head and shoulders setup on Tuesday, confirmed the pattern, and then plummeted down to make a new low at $59K. Can the current relief rally take the $BTC price back to $63,700 or is this just a temporary pause before the next big move down?

Relief rally in progress, but bears have the upper hand

Source: TradingView

The short-term 4-hour chart reveals how the $BTC price broke down sharply from the head and shoulders pattern once it had confirmed the neckline. A quick dump resulted, and the price came down far enough to post a new low at slightly above $59K. 

However, the bulls were not sitting by idly, and once the price had got down to the $59,600 horizontal support, buying came in and reversed the price back to the upside. While the 4.7% ($2,800) price gain from the bottom is a decent return so far, this may just be a relief rally before the bears come back for another sortie into the lows.

As far as it goes for the bulls, the current rally could continue on back to the underside of the head and shoulders pattern and the $63,700 horizontal resistance. We can also add to this the 100-SMA. If it gets there, a rejection is quite a likely probability. This would also only succeed in putting in a lower high. The bears most certainly continue to have the upper hand.

Will the $BTC price fall and hold below the bull market trendline?

Source: TradingView

The daily chart illustrates that the $BTC price has still not met the full measured move out of the head and shoulders pattern, as shown by the red arrow down. 

The price is now deciding whether it can hold above the bull market trendline or if it will dip below again. If it does fall below and confirms beneath this most important of trendlines, this could be the signal that the final stage of the bear market could be about to take place.

If the last major dip is indeed about to happen, and the target is the bear market trendline, just another week from here would put a touch of this trendline at a price of around $50K. The next move could be a fast one.

$BTC price must close weekly candle above bull market trendline

Source: TradingView

The weekly chart view reveals just how on the edge the $BTC price is at the moment. This week’s closing candle simply must close above the bull market trendline, and preferably above the 200-week SMA. The all-important $66K horizontal resistance looks to be unattainable, given the four successive weeks of not being able to hold above.

The next potential dip looks the favourite to occur, taking the price down somewhere into the $50,000s. More likely than not into the lower end of this range.

Meanwhile, the Stochastic RSI indicator lines continue to fall. Another week or two could see them at the bottom and ready to bounce. Could their rise back to the top signal the beginning of a new bull market?

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.