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Resistance Ahead: Bitcoin Bulls Must Break $8,500
A move above resistance at $8,500 would provide confirmation bitcoin’s bear market has ended, the technical charts indicate.
Over the weekend, the cryptocurrency clocked a three-week high of $8,458 on Bitfinex, adding credence to the short-term bull reversal confirmed last Thursday. Further, the 30 percent rally from $6,425 (April 1 low) proved that the much-feared “death cross” indicator was in fact a bear trap.
Still, the job is only part done, as bitcoin (BTC) has yet to violate the descending trendline established since Dec. 17.
As seen in the chart above, the descending trendline, representing a series of lower price highs over the last four months, is still intact. The trendline hurdle is seen around $8,500. The 50-day moving average (MA) is also lined up at 8,516.
A high volume break above the confluence of the trendline and the 50-day MA could be considered the final confirmation of the bearish-to-bullish trend change.
That said, BTC’s first attempt to scale the key resistance failed – running out of steam at $8,415 and falling back to $8,100 this morning. As of writing, the ascending (bullish biased) 5-day MA is capping the downside in prices.
There may be clues as to the reason for the retreat in the short-duration chart below.
The bearish relative strength index (RSI) divergence is a slightly worrying sign for the bulls and could yield a drop to $7,700-$7,600 range.
However, such a decline would likely be short-lived, as the 5- and 10-day MAs are biased to the bulls (trending north). While, last Thursday’s over $1,000 rally confirmed a double bottom bullish reversal and falling wedge breakout (bullish pattern).
Furthermore, the weekly chart below indicates that bitcoin has established the ascending 50-MA as a strong support, meaning that only a close below that line would revive the bearish view.
Many traders/analysts are of the opinion that only a move above $11,700 would signal a long-term bull market reversal.
While that may be true, a convincing move above $8,500 (falling trendline hurdle as seen in the daily chart) could be considered as an advance indicator of an impending break above $11,700. That’s because the breach of the trendline hurdle would signal the end of the downtrend from bitcoin’s December all-time high of around $20,000.
- A high volume break above $8,500 (falling trendline hurdle would confirm a long-term bearish-to-bullish trend change.
- A healthy pullback to $7,700-$7,600 could be seen, but will likely be short-lived.
- A daily close (as per UTC) below the 10-day MA would abort short-term bullish view.
- Only a break below the weekly 50-MA (currently seen at $6,9510) would revive the bearish outlook.
Barrier image via Shutterstock
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Author: Omkar Godbole
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