According to technical analyst Katie Stockton of Fairlead Strategies, the recent sell-off in bitcoin has increased the risk of further downside as the cryptocurrency attempts to reclaim a key support level. Bitcoin fell below its 50-day moving average and its support level of $64,900 over the weekend, down 13% in the past week and 16% from its record high on March 14.
Stockton highlights $57,800 as the next level of support, representing a potential 8% downside from current levels. If that level is broken, the next support level at $51,500 could see a further 18% decline. This is due to increased short-term risk, as indicated by Fairlead’s short-term momentum signal, which has flipped to bearish from bullish this week. The intermediate-term signal has also turned neutral from bullish, but the long-term signal remains positive.
Despite the decline, Stockton sees the pullback as an interruption in the uptrend rather than a bearish reversal. The recent breakout above the 2021 high suggests a long-term target of $80,600, representing potential upside of 29% from current levels. This gives Stockton confidence that the decline could be a healthy correction before a continuation of the uptrend.
In conclusion, the recent sell-off in bitcoin presents an increased risk of further downside, but Fairlead Strategies believes it is just a temporary setback in the overall uptrend.
