Bitcoin Faces Price Pullback as Signs of Bull Exhaustion Emerge

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• BTC risks falling below $8,000 in the short-term, having created a doji candle last week.
• Below $8,000, the focus would shift to the 30-day moving average, currently at $7,643, which has a penchant for reversing price pullbacks.
• The outlook as per the daily chart would turn bearish if the price sees a UTC close below the 30-day MA. The long-term outlook will remain bullish as long as the price is trading above May's low of $5,263.
• The case for a short-term correction would weaken if bitcoin bounces from the bullish 5-week moving average, currently at $8,220, and ends up clearing today's high of $8,746.

BTC$106,803.77 could revisit sub-$8,000 levels in the short-term, as a longer-duration chart is flashing signs of bullish exhaustion for the first time this year.

The world's top cryptocurrency by market capitalization witnessed solid two-way business last week. Prices rose to fresh 12-month highs near $9,100 only to fall back all the way to $8,000 before registering a flat close at $8,735, according to Bitstamp data.

The indecisive price action came after a solid rally. For instance, BTC rose by $3,800 in the preceding four weeks and is currently up more than 125 percent on a year-to-date basis. Further, BTC closed May with 62 percent gains – the biggest monthly gain since August 2017.

So, the ambiguous trading activity witnessed last week could be considered a sign of buyer exhaustion. That argument would be further strengthened if prices settle below $8,000 this Sunday.

Therefore, the psychological support of $8,000 is the level to defend for the bulls. As of writing, BTC is changing hands at $8,465 on Bitstamp, representing a 1.2 percent drop on a 24-hour basis. Prices hit a high and low of $8,746 and $8,336, respectively, earlier today.

Weekly chart

Bitcoin created a classic doji candle last week, signaling indecision in the market place.

The candlestick, however, appeared following a four-week winning streak and with prices at one-year highs. So, it seems safe to say that indecision or exhaustion is predominantly among buyers.

It's worth noting that BTC created a similar looking doji candle in the seven days to April 14. The pattern, however, failed to yield a correction and prices hit a fresh multi-month high above $5,600 by month end, possibly because the 14-week relative strength index (RSI) was biased bullish at the time.

The latest doji candle is accompanied by overbought readings above 70 on the RSI. As a result, a correction to levels below $8,000 looks likely.

That said, the 5- and 10-week moving averages (MA), currently at $8,220 and $6,762, respectively, continue to trend north, indicating a bullish setup, and could put the brakes on any price drop.

The psychological resistance of $9,000 could come into play if bitcoin bounces from the 5-week MA at $8,220 and ends up clearing today's high of $8,746.

Daily chart

On the daily chart, the RSI has produced lower highs, contradicting the higher highs on the price.

That bearish divergence, coupled with the "bearish outside day" candle created on May 30, indicates the cryptocurrency is overdue for a pullback, possibly to the historically strong support of the 30-day MA, currently at $7,648.

That average has consistently reversed pullbacks throughout the rally from lows near $3,700 seen on Feb. 8.

As a result, a strong bounce from that MA would revive the short-term bullish setup, while a UTC close below that level could embolden sellers, leading to a deeper correction.

Monthly chart

BTC closed last month with 62 percent gains, marking a strong follow-through to the falling channel breakout or long-term bearish-to-bullish trend change confirmed by April's candle.

The breakout looks stronger now as the 5-month MA has crossed above the 10-month MA – the first bullish crossover of those lines since September 2015.

The 5- and 10-month MAs are currently located at $6,032 and $5,414, respectively, and would likely come into play should prices find acceptance below the 30-day MA at $7,648.

The long-term bullish outlook would be invalidated only if the price drops below May's low of $5,263.

Disclosure: The author holds no cryptocurrency assets at the time of writing.

Bitcoin image via Shutterstock; charts by Trading View