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- Bitcoin could find its footing after its recent price decline if it holds $34,000 as support, according to technical analyst Katie Stockton of Fairlead Strategies.
- Oversold conditions are apparent from short and medium term perspectives, according to Stockton.
- If Bitcoin is able to close above its 20-day moving average, it could set up for a surge to its 50-day moving average near $46,000, Stockton said.
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Bitcoin's recent price decline could reverse if the cryptocurrency manages to hold a key support level near $34,000, according to a Tuesday note from technical analyst Katie Stockton of Fairlead Strategies.
Bitcoin has tumbled more than 10% this week, in part due to a report that the US government was able to clawback a portion of the $4.4 million ransom payment made by Colonial Pipeline to the hacker group known as DarkSide.
While the price action has been weak in bitcoin since it peaked in mid-April, Stockton noted that it has entered oversold conditions in both the short- and medium-term, which could set the cryptocurrency up for a sizable bounce higher.
Those oversold conditions give bitcoin "a better chance to find its footing," according to Stockton. If bitcoin is able to reclaim its 20-day moving average near $36,000, it would be a short-term bullish development that sets the stage for a surge back to its 50-day moving average, which is currently around $46,000.
A move to those levels represents potential upside of 45%. Bitcoin is currently trading at about $31,000 as of Tuesday morning.
But if bitcoin notches a decisive breakdown below $34,000, marked by consecutive daily closes below that level, then weakness could continue to linger. "Short-term momentum has deteriorated," Stockton observed.
"As it stands, we would look for bitcoin to establish a lower high versus April without damaging the longterm uptrend," Stockton concluded.
