Bitcoin dropped below $7,000 a few minutes before press time, in a move that warrants caution as a possible bull trap.

The leading cryptocurrency closed yesterday (as per UTC) above the trendline sloping downwards from the March 5 high and May 5 high, seemingly confirming a long-term bearish-to-bullish trend change.

However, the follow-through has been disappointing. As of writing, BTC is changing hands at $6,965 on Bitfinex – down 3.5 percent on a 24-hour basis.

The negative price action reminds us of a failed long-term bullish breakout seen in July, although the long-term bull reversal is likely to be intact, according to technical studies.

As seen in the above chart, bitcoin's move above the falling channel hurdle (or falling trendline) on July 24 trapped the bulls on the wrong side of the market.

During that event, BTC had crossed the long-term falling trendline hurdle to print a high of $8,507 only to fall back below the psychological support of $6,000 by mid-August.

The bull breakout was short-lived, possibly due to overbought conditions indicated by a relative strength index (RSI) of 77.00.

More importantly, the BTC market was rocked by the US Securities and Exchange Commission's (SEC) rejection of the bitcoin exchange-traded funds (ETFs) at the end of July and that played a big role in pushing prices below $6,000.

As for today, the RSI is located at 64.50, meaning there is plenty room for an extension of the rally towards the immediate resistance lined up at $7,806 (200-day moving average). Further, the markets seem to have priced-in the ETF-related bad news in the first half of August.

And last but not the least, BTC's recovery from $5,859 (August low) has produced the first higher price low of the year, which indicates the tide is turning in favor of the bulls.

As a result, it seems that despite today's dip, BTC's bullish move above the falling channel hurdle looks legitimate and the rally is sustainable.

While the cryptocurrency is losing altitude at the time of writing, the pullback will likely be short-lived as both the short-and long-term technical studies are biased toward the bulls

The 4-hour chart too, suggests the outlook remains bullish, with the rising channel still intact.

Further, the stacking order of the 50-candle, above the 100-candle, above the 200-candle moving averages (MAs) is a typical bullish signal.

However, the bull case would weaken if the cryptocurrency finds acceptance below the rising channel.

Disclosure: The author holds no cryptocurrency assets at the time of writing.

bitcointrap image via Shutterstock; Charts by Trading View