Bitcoin sinks nearer to the $3000 level

The leading cryptocurrency is consolidating below $3,500 for the third day straight as the challenge remains whether the bulls or the bears will win out in the coming days.

Bitcoin could soon see a corrective rally if prices manage to clear the crucial resistance at $3,633–the high of an “inverted hammer” candle on the 3-day chart–by Friday’s UTC close.

The bull case is also bolstered by Bitcoin’s 14-week relative strength index, which has been reporting oversold conditions for the first time since January 2015. A corrective rally hence, is much overdue.

The odds of a move above $3,633 would rise if Bitcoin’s five-day-long narrowing price range ends with a bullish breakout. As of writing, the upper edge of the price range is located at $3,456 and the lower edge is seen at $3,360. It is worth remembering however that BTC has repeatedly struggled to score a significant and lasting rally in recent weeks, despite oversold conditions.

Bitcoin is currently trading at $3,400 on Bitstamp, representing a 0.75% drop on a 24-hour basis. It has created a symmetrical triangle on the hourly chart. A bull breakout would validate the argument put forward by the 3-day inverted hammer candle that bargain hunters are beginning to challenge the bears’ resolve to push prices lower. As a result, the triangle breakout, if confirmed, could yield a quick move higher to $3,633.

Bitcoin, however, risks falling to the 200-week moving average (MA) of $3,179 if prices pierce the triangle support of $3,360. That long-term MA support will likely hold ground, as the 14-week RSI is reporting extreme oversold conditions.

Many market technicians believe that a break of an RSI trendline often precedes the break of a trendline in price. By that logic, the falling channel breakout in the 6-hour chart RSI could be considered an advance warning of an impending bullish price move.