Bitcoin (BTC/USD) had surged during the Asian trading session and in the first few hours since the weekly close, and seems to be in a potential blow-off phase of this recent impulsive move from $9,111 ($12 018 CAD).
Over the course of this past weekend, BTC managed to first close back above the 50-day simple moving average (MA50), followed by a daily close above major horizontal resistance turned support at $10,800 ($14,248 CAD), which then opened the road to the current upside, and took BTC back above $11,000 ($14,512 CAD) for the first time since 20 July 2019.
This past week has seen BTC drop to a low of $9,111 level ($12,018 CAD), shaking out investor confidence over the short term, before quickly reversing, rallying on low volume, and trapping shorts in the process.
There are a few factors to take into account, however, before a further bullish case can be considered sustainable for BTC over the short term.
In general, price action has been choppy since the $13 880 ($18 309 CAD) peak, as the larger corrective phase is notoriously difficult to navigate, and although BTC is at strong technical resistance, if price does close above that trend line resistance on the 4H and daily chart, there could certainly be further upside to come, although a reversal seems more probable at this stage.
On the weekly chart, the weekly close for BTC had a bullish engulfing candle, which usually entails some continuation of late, however we are currently sitting right at significant resistance ($11 600 – $11 850) ($15 300 CAD – $15 630 CAD), in the form of the 0.618 Fibonacci retracement level ($11 614) ($15 320 CAD) of the recent corrective move from $13 200 ($17 414 CAD) to $9 049 ($11 938 CAD) on the daily chart; the 0.214 Fibonnaci retracement level (mathematical complement of the 0.786 Fibonacci resistance) of the overall move from the $3 122 ($4 119 CAD) lows to the recent $13 880 ($18 309 CAD) peak on the weekly chart; major trend line resistance connecting the recent swing highs on the daily chart (+-$11 850) (+-$15 634 CAD); as well as considerable horizontal resistance at $11 475 ($15 140 CAD).
A daily close below $11 475 ($15 140 CAD) probably won’t end well for the bullish case if price then closes below the next 2 levels of major horizontal support, at $11 200 ($14 777 CAD), subsequently followed by $10 800 ($14 248 CAD).
BTC is yet to retest the 100-week simple moving average (SMA100), which is currently above weekly SMA50. SMA100 also currently coincides with trend support connecting the July lows.
This is also the 0.618 Fibonacci retracement level (mathematical complement of the 0.382 Fibonacci support) of the overall move from the $3 122 ($4 119 CAD) lows, at around $7 231 ($9 540 CAD). This bearish scenario could see us testing those levels in the weeks to come.
On the daily chart, ADX and DI, which identifies trend direction and trend strength, had a bullish crossover at the start of the month, however there is weak trend strength with ADX below 20, which means the upside is more than likely limited.
Trading volume picked up on the daily close yesterday, however, it has been been tapering off with each successive bounce since the $13 880 ($18 309 CAD) peak, while price has been gradually rising. This reflects the weakening bullish momentum and can be interpreted as bearish. This can also be reflected in the declining weekly Money Flow Index (MFI) which incorporates both volume and price.
Relative Strength Index (RSI) is currently also sitting in overbought territory on the daily chart, so there is a higher probability of a reversal from the current range of resistance when coupled with our short term signals and the currently strong resistance, although RSI can stay overbought for a while and there is hidden bullish divergence on the lower time frames so this could break out above $12k, however, it remains to be seen whether price closes above that level on the 4H and daily chart.
For the short term, and at the time of writing, there is hidden bullish divergence on the 1H MFI so expecting a short-lived breakout above $12k ($15 830 CAD), possible to $12 500 ($16 490 CAD), but then there seems to be potential for bearish divergence on the 4H Money Flow Index (MFI) which could play out afterwards, where price is printing higher highs while MFI has printed a lower high. Coupled with this, RSI is also overbought on the 4H chart.
BTC did have a bullish cross between 4H SMA50 and SMA100 which subsequently resulted in the price surge from $11 000 ($14 510 CAD) to $11 800 ($15 565 CAD), however this can potentially cross back to the downside. A 4H cross between SMA50 and SMA200, would support the bullish case.
To summarize, the bullish case will be a daily close above that trend line resistance around $11 850, and the bearish case is a daily close below $10 800 ($14 248 CAD).
As mentioned, BTC is still currently in the midst of a larger corrective phase, so the bearish case does carry more weight, however if price does close above that trend line resistance on the daily chart with strong advancing volume, the bullish case for new yearly highs could be a possibility once the recent $13 880 ($18 309 CAD) peak is breached.
DISCLAIMER: The analysis provided in this article is for educational purposes and should not be considered an investment recommendation, All examples and analysis used are for illustration purposes only. All analysis is of the personal opinion of the technical analysis writer.
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