Bitcoin’s (BTC) recent rally and new all-time high beyond $126,000 are starting to show signs of overheating on Thursday, October 9, as the daily technical picture flashes historically fairly reliable indicators of a coming correction. 

Namely, the Tom DeMark (TD) Sequential, which identifies potential reversals by counting consecutive price bars, rose to 9 on the cryptocurrency’s 24-hour chart. 

This parameter, as on-chain crypto analyst Ali Martinez notes, has been quite accurate this year, as the same value presaged a 7% pullback in July and a 13% drop in August.

What’s more, Martinez’s analysis further suggests that the relative strength index (RSI) of 74.21 is likewise implying that “digital gold” is in the overbought zone.

At the same time, the +100 reading on the Chande Momentum Oscillator (CMO), a market momentum measurement that oscillates between -100 and +100 and often peaks just before market reversals, adds further support to the argument.

At the time of writing, Bitcoin is trading at roughly $121,750, down 0.59% on the day. If the RSI or CMO flatten or fall while the price remains the same or goes up, a bearish divergence would become likely.

A breakout still possible

On October 7, another prominent strategist, TradingShot, also predicted Bitcoin was due for a short-term pullback due to a key technical rejection at the higher highs trendline near $126,000.

This number, the reasoning went, has consistently capped price action since July 14 and acted as strong resistance throughout the crypto’s three-month consolidation, marking the top of several previous rallies.

Much like Martinez, TradingShot pointed out that this recent price denial closely mirrors price behavior from mid-July and mid-August, both of which led to significant retracements.

However, the analyst also added that a decisive breakout above the $126,000 resistance would invalidate this bearish setup and signal the start of a new upward trend.

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