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Bitcoin (BTC) has surged approximately 300% from $15,470 last November to nearly $70,000. This impressive rise is now facing warning signals from leading technical indicators.
Bitcoin Shows “Overbought Decline” Signal
Fairlead Strategies‘ technical analysis indicates Bitcoin’s monthly stochastic indicator is currently signaling an overbought decline, suggesting weakening upward momentum. The stochastic oscillator is a momentum indicator used to compare an asset’s current market value to its price range over a specific period. The indicator fluctuates between 0 and 100, with readings above 80 indicating overbought conditions. An overbought decline is defined by the oscillator turning downward from above 80, indicating a weakening upward trend and potential price drops.
Fairlead Strategies noted that Bitcoin’s 14-month stochastic has fallen below 80, and if this continues until the end of August, the overbought decline signal will be confirmed. This could indicate the end of the cyclical rise that started from the 2022 low.
On the other hand, the price rise of the largest cryptocurrency has stalled since March, with bulls unable to maintain a hold above $70,000. The trendline resistance on the monthly chart is at this level.
MACD and Ichimoku Cloud Indicators Also Confirm Decline
The anticipated decline signal in the stochastic indicator is supported by shallow bars in the MACD histogram and a flat Ichimoku cloud. The MACD histogram is a widely used indicator to measure the strength and changes of a trend. Crossings above and below the zero line represent bullish and bearish trend changes, respectively, and the height of the bars indicates the strength of the movement. The Ichimoku cloud is another momentum indicator.
Fairlead Strategies indicated that these indicators signal a “challenging period” for Bitcoin. Specifically, confirming the stochastic decline at the end of the month could be a strong signal that the market may face more pressure in the short term.
Fairlead Strategies’ technical analysis on Bitcoin’s current situation offers important warnings for investors and suggests that the market could see significant movements in the coming period.
