Bitcoin bulls appear to be returning as price bounced off the $7,020 area to start a pullback from the drop. Using the Fibonacci retracement tool on the latest swing high and low shows that the 50% level lines up with the channel resistance while the 61.8% level is closer to a key area of interest.

The 100 SMA is below the longer-term 200 SMA to signal that the path of least resistance is to the downside. This means that the selloff is still more likely to resume than to reverse. The 100 SMA could also hold as dynamic resistance since it’s near the 38.2% Fib.

RSI is still moving up to show that bulls have more energy left, which could lead to a move up to the highest Fib at the broken $8,000 support. The gap between the moving averages is widening to reflect stronger selling momentum while RSI is nearing overbought conditions.

Similarly stochastic is heading up but is also nearing the overbought zone to signal weakening bullish pressure. Turning lower could bring sellers back in and lead to a move back to the swing low or channel bottom closer to $7,000.

With anti-EU sentiment being feared to return and weigh on the global outlook, bitcoin appears to be drawing support from political jitters as it did so before. Italy’s political situation is still a mess as fresh polls might be needed due to the lack of support for the coalition government leaders. Spain is also set for elections so there’s plenty of uncertainty in the region.

According to Brian Stutland of Equity Armor Investments, bitcoin seems to be the new fear gauge as there is a correlation between the VIX and its price. He mentioned in an interview with CNBC FastMoney:

“That’s what cryptocurrency is becoming. It’s becoming a way to sort of de-risk yourself from credit risk in the banking industry.”

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