It may not have been the asset’s biggest rally, but it’s hard to say bitcoin isn’t building on gains.
Since hitting an annual low of $5,785 in June, bitcoin has increased roughly 15 percent against the U.S. dollar, and technical indicators suggest the cryptocurrency might not be calling it quits just yet.
That said, you’d be forgiven for having doubts. The rally has been interrupted over the past few days by resistance at $6,800, a level first approached on July 4. With a close of $6,584, the day arguably saw control slip back into the hands of bears eager to drive prices lower.
However, bears couldn’t further capitalize as price followed the rejection by entering a narrow trading range of less than $250 over the following two days. (Narrowing ranges typically end in a breakout and this was no exception. As such, bulls were able to swing prices back to $6,840 on July 7.)
Still, several technical indications suggest positive sentiment is building and that prices could comfortably rise above $7,000 in the coming days.
4-hour chart
After rejecting from the 0.236 Fibonacci retracement level (from May high of $10,000) the bitcoin price has formed the continuation pattern of a bull flag.
What’s more, the CMF, an indicator used for displaying buy and sell pressure, shows buy pressure is mounting while price is traveling down the flag (a bullish divergence).
The 4-hour chart also displays a bullish cross of the 50- and 200-period exponential moving averages (EMA), further adding to the bullish bias.
The volume profile visible range shows low volume nodes (LVN) near $6,850-7,000, making the levels easier to be penetrated since it is an area lacking overall investor interest.
Inverse head and shoulders
An inverse head-and-shoulders pattern has also appeared on the 4-hour chart, the neckline of which is the same elusive resistance of $6,800 previously mentioned.
A convincing close above the neckline has the potential for the trend reversal pattern to take effect, potentially opening the doors to the next Fibonacci retracement (0.382) near $7,400.
Weekly
On a wider lens, the price of bitcoin recently found support on the 75-week exponential moving average (EMA) for the second time in two years, granting bulls more time to cross their next hurdle – the descending trend line of resistance.
A convincing break of the inverse head-and-shoulders pattern and the $6,800 level would likely send price to the test the fast approaching trendline and potentially break it.
Since technical analysis is largely self-fulfilling prophecy, breaking the widely recognized trendline would increase overall bullish sentiment, potentially setting scope for prices in the higher end of the $7,000 range.
View:
- An upside break of the current bull flag could breach the $6,800 level, causing the inverse head and shoulder pattern to take effect and potentially put bitcoin on the path to $7,000 – $7,400 in the coming days. A break of the long-term trendline could yield even further growth.
- Acceptance below July 4th low of $6,414 would negate the short term bullish view while falling below the 75-week EMA would likely confirm a longer-term bearish trend confirmation.
Bull image via Shutterstock
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https://www.coindesk.com/7k-bitcoin-price-indicators-shift-rally-bulls-favor/
