We expected Bitcoin to find support close to $6,250 but it plunged down to $6,120.45 on July 12. This invalidates our expectations of an inverse head and shoulders pattern. Still, if the bulls defend the zone between $5900 and $6075, the digital currency can form a double bottom.
Led by Bitcoin, most cryptocurrencies are showing a positive divergence on the RSI. However, until confirmed by a bullish price action, we can’t take a trade on the basis of this divergence alone.
So, at what point does the trend change?
As the BTC/USD pair has still not broken down of the $6,000 threshold convincingly, there is no reason for us to abandon our anticipation of a large range of $6,000-$12,000.
We will change our view if the digital currency slumps below $5,900 and fails to recover above it quickly. Under such circumstances, the decline can extend to between $5,000 and $5,450.
On the upside, we shall add to our existing position once the pair breaks out of $7,000 because that improves the probability of a rally to $10,000 with minor resistances at $7,750 and $8,560.
Traders who follow us are holding long positions initiated at $6,650. We suggest to continue holding on to them until the bears succeed in sustaining below $5,900 for four hours.