Hut 8 Mining Corp (NASDAQ:HUT) was trading down 8% at one point on Monday in sympathy with Bitcoin (CRYPTO: BTC), which attempted to regain an important psychological level at $50,000 on Sunday but failed, along with Ethereum (CRYPTO: ETH) which has fallen below the $4,000 mark, confirming that a downtrend is in play.
The crypto mining sector has experienced an exaggerated reaction to the cryptocurrency market pull back, with Hut 8 losing about half its value since reaching a Nov. 9 all-time high of $16.57. In comparison, Bitcoin and Ethereum are trading down about 31% and 21%, since reaching their respective all-time high of $69,000 and $4,867.81 on Nov. 10.
Although Hut 8 may be in for an oversold bounce in the near future, the stock may experience further downside if it can’t hold a key level at $$7.70.
See Also: What’s Next For Bitcoin? Here’s What Analysts Are Saying
The Hut 8 Chart: Hut 8 has been trading in a falling channel since reaching its all-time high, making a series of consistent lower highs and lower lows on the daily chart. The stock’s most recent lower low was printed on Dec. 6 at the $7.95 level, and the most recent lower high was created at the $10.32 mark on Dec. 7.
On Monday, Hut 8 came close to testing the Dec. 6 low-of-day as support and bounced up slightly. If the stock falls below the area, it will confirm the downtrend is still intact. The support zone also coincides with the median line of the falling channel, which is currently helping to prop Hut 8 up.
Hut 8’s relative strength index (RSI) is measuring in at about 30%, which indicates a bounce may be in the cards. When a stock’s RSI nears or drops below the level, it becomes oversold, which can be a buy signal for technical traders. When Hut 8’s RSI reached the same 30% level on Dec. 6 the stock shot up about 30% over the two trading days that followed, which allowed Hut 8 to print the subsequent lower high.
Hut 8 is trading below the eight-day and 21-day exponential moving averages (EMAs), with the eight-day EMA trending below the 21-day, both of which are bearish indicators. The stock is also trading well below the 50-day simple moving average, which indicates longer term sentiment is bearish.
Want direct analysis? Find me in the BZ Pro lounge! Click here for a free trial.
- Bulls want to see Hut 8 hold above and bounce up from the $7.95 level, which would create a bullish double bottom pattern. The stock has resistance above at $8.82 and $9.63.
- Bears want to see big bearish volume come in and break Hut 8 down to print a lower low and then for momentum to push the stock below the key $7.70 level, which it has not closed a trading day below since Aug. 27. There is support below that level at $6.67 and $5.76.
Related Link: Will Bitcoin Mining Keep Growing? This Company Thinks So