Bitcoins recent price rally is looking as overstretched, according to a technical indicator.<\/p>\n
The money flow index (MFI), a momentum indicator that incorporates both price and trading volumes, has risen to 86.00 on the three-day chart.That's the highest level since late 2017 when prices hit a life-time high of $20,000. A reading above 80 indicates overbought conditions.<\/p>\n
The overbought conditions do not necessarily imply an imminent bearish reversal but likely represent over-exuberant bitcoin buying, since the cryptocurrency has rallied by more than $3,500 over the last six weeks.<\/p>\n
Also, markets sometimes enter into very strong trends, in which case the MFI can stay overbought for a prolonged period of time.<\/p>\n
That said, the latest above-80 reading on the MFI has gained credence with bitcoins failure to keep gains above $10,350 (Oct. high) resistance earlier today.<\/p>\n
The long upper wick on the latest three-day candle represents a failure on the part of the bulls to establish a secure foothold above the horizontal resistance of $10,350 a sign of buyer exhaustion.<\/p>\n
That, along with MFIs overbought signal, indicates scope for a temporary pullback or consolidation.<\/p>\n
Prices may fall back to the 5-candle moving average (MA), currently at $9,876, if the bulls fail to engineer a convincing break above $10,350 during the U.S. trading hours. <\/p>\n
The overall bias will remain bullish as long as prices are holding above the Feb. 4 high of $9,075, as discussed on Tuesday.<\/p>\n
The hourly chart relative strength index has produced lower highs, contradicting higher highs on price. The bearish divergence supports the case for the price pullback put forward by the three-day charts.<\/p>\n
Bitcoin created a bullish engulfing candle on Tuesday, signaling a continuation of the uptrend.<\/p>\n
Bullish bias would further strengthen if prices find acceptance above $10,383 (engulfing candles high), bringing additional gains toward the next big resistance at $10,949 (September high).<\/p>\n
Bitcoin is currently trading at $10,355, representing 5.66 percent gains on a 24-hour basis, according to CoinDesk's Bitcoin Price Index. <\/p>\n
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