Bitcoin's retreat from Sunday's high of $7,779 has poured cold water over the bull mood generated by the weekend's positive price action and neutralized the immediate outlook.
BTC closed on Sunday (as per UTC) above a key falling trendline resistance level, signaling a short-term bullish-to-bearish trend change. A bullish crossover between the 5-day and 10-day moving average (MA) also favored a short-term positive price action.
However, bitcoin suffered a rising wedge breakdown (bearish pattern) in the U.S. hours on Monday, signaling that the corrective rally from the recent low of $7,040 had ended.
In the end, the failed breakout was no surprise, as low trading volumes had warned of a bull trap.
At press time, the cryptocurrency is changing hands at a four-day low of $7,426 on Bitfinex, down 2.5 percent over 24 hours.
Daily chart
The above chart shows that bitcoin is back inside a falling channel and risks a quick drop to $6,980 (triangle support) if the bulls fail to defend the support at $7,260 (May 24 low).
A false breakout is usually considered a strong bearish signal. Further, the rising-wedge breakdown as seen in the 4-hour chart below, also indicates the corrective rally has ended and prices could soon revisit the recent low of $7,040.
4-hour chart
Still, the overall outlook may be more neutral, with bitcoin creating a doji candle on the 4-hour chart above, signaling indecision in the marketplace.
If the current 4-hour candle closes below $7,732, it could bolster the already bearish technicals (failed breakout). Meanwhile, if the current 4-hour candle closes above $7,500, bitcoin could revisit $7,700.
View Bitcoin's drop back inside the falling channel as seen in the daily chart indicates the immediate upward pressure has eased. Acceptance below $7,260 would confirm the corrective rally has ended and could yield a drop to $6,980 (triangle support). A daily close below $6,980 would signal a revival of the sell-off from the record high of $19,891. In this case, BTC could revisit and possibly break below the February low of $6,000. A short-term bullish revival is seen only above Sunday's high of $7,779.Tug-of-war image via Shutterstock
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