Bitcoin is flirting with a key support level that could give way to more downside if broken, according to Fairlead Strategies' Katie Stockton.- Consecutive weekly closes below $37,400 would suggest a continued downtrend to $27,000.
- "The weekly stochastics have turned lower, further increasing the possibility of a breakdown," Stockton said in a Monday note.
$4 prices are gearing up for a big test of support as momentum indicators continue to deteriorate, according to Katie Stockton of $4
The cryptocurrency is flirting with a key support level at $37,400, and if decisively broken would suggest a continuation of the ongoing downtrend to secondary support at $27,200, according to a Monday note from Stockton. That represents downside potential of 27% from current levels.
"Downside momentum still has a hold from an intermediate-term perspective, and the weekly stochastics have turned lower, further increasing the possibility of a breakdown," Stockton explained.
Bitcoin traded to a low of around $36,500 on Tuesday before staging a rebound to about $38,000. The cryptocurrency has been $4 since it hit a high of about $69,000 in November. Recent weakness $4 by anticipated $4 and rising geopolitical tensions between Russia and Ukraine.
What's key to the expectation of more potential downside in bitcoin, according to Stockton, is a decisive break of support which is represented by two consecutive weekly closes below $37,400.
If that level is decisively broken, "risk should be managed" as long-term momentum has recently weakened to neutral territory from bullish, Stockton observed. Meanwhile, intermediate-term momentum is neutral while short-term momentum is bearish.
"Short-term momentum is now to the downside, suggesting that short-term oversold conditions may not prevent a breach of support this week," Stockton explained.
But if bitcoin manages to mount a positive turnaround in price action and reverse some recent losses, it is likely to be met with resistance around $42,500, according to Stockton, representing potential upside of 13% from current levels.