Bitcoin Price News: Failed Breakout of $71K Resistance Anticipates Big Drop

Bitcoin (BTC) has by 7% in the past 7 days and could be in for further downside as the price action shows clear signs of a rejection of the $71,000 area.

Trading volumes did not spike in the past 24 hours, as one would expect after such a strong rejection. Meanwhile, long liquidations are relatively low as well, barely exceeding the $100 million mark during this same period.

This is evidence that the price has not yet reached a tipping point where bulls get squeezed out of their long positions.

Interestingly, Bitcoin exchange-traded funds (ETFs) booked positive net inflows yesterday after three consecutive days of outflows. These vehicles brought in a combined total of $167 million yesterday, starting the week on a positive note.

Meanwhile, market sentiment improved after yesterday’s jump in the price of most cryptocurrencies. The Fear and Greed Index jumped to 34 today, almost out of “Fear” territory. However, today’s drop could once again depress investors if BTC fails to recapture the $70,000 area soon.

Drop Below $68K Could Put Bitcoin’s Relief Rally to an End

We have been closely watching the $71,000 level as this was the upper bound of BTC’s latest consolidation pattern. Two failed breakouts may be paving the way for a stronger drop to $65,000 and $60,000 in the near term if bearish momentum accelerates.

We were expecting a signal from our system to confirm the market’s next move. Sadly, we got a “sell”. This is bad news for the top crypto’s latest rally, as it means that institutions and whales, the ones who can move these kinds of volumes, are net sellers right now.

Our signals system picks up “decisional” candles across multiple time frames. These are specific candle patterns accompanied by above-average volumes. When they pop up near key price zones, like the $71K resistance, we interpret it as a high-probability setup.

The Relative Strength Index (RSI) just dropped below the 14-period moving average in the 4-hour chart, also indicating growing selling pressure. The $68,000 level would be the key area to watch right now. If bulls lose that one, then a drop to $60,000 would be highly likely.

Two Trading Opportunities for Bitcoin Shorts Emerge in the Hourly Chart

Moving down to the hourly chart, we have two ways to play this latest drop for a potential trade. The first would involve waiting for a retest of the $70,000 area from below to open a short position with a first target set at $68,000.

This is a quick trade for scalpers that offers a 1.8x risk-reward ratio if we use that first target as our take-profit level number one. However, this trade could evolve into a much more rewarding 3x risk-reward short position if we set the $65,000 support as the exit point.

This short position is supported by the sell signal we got both in the 4-hour and 1-hour charts. Meanwhile, traders could also wait for a confirmed bearish breakout below the $68,000 support to open up a short.

Setting the $62,500 area as the exit for this one, this is a trade that offers a much more attractive 4x risk-reward, and is also the “safest” of the two in relative terms, as BTC’s bullish structure would be fully broken at this point.