- Bitcoin has erased losses seen on Monday with a strong bounce from the bullish 5-week moving average (MA) support of $3,703. That has raised the odds of a rally to the psychological hurdle of $4,000.
- The bull flag breakout on the hourly chart also shows scope for a rise to $4,040 (target as per the measured move method). The bullish case would weaken if the flag breakout ends up trapping the bulls on the wrong side of the market.
- A UTC close below $3,658 (Feb. 27 low) would put the bears back in the driver’s seat. That looks unlikely, as the quick recovery from key MA support has bolstered the bullish bias signaled by both the long-tailed doji candle created on Feb. 27 and the weekly chart indicators.
With bitcoin’s (BTC) quick reversal of the losses seen on Monday, the technical charts are again pointing to a rally to $4,000.
The leading cryptocurrency by market capitalization jumped to a high of $3,877 yesterday, before seeing a UTC close at $3,844, according to Bitstamp data. The 3.9 percent gain engulfed the 2.4 percent drop registered on Monday.
More importantly, the bounce from the 5-week moving average (MA) support at $3,703 has reinforced the bullish view put forward by that ascending momentum study. The MA is also holding above the 10-week MA, signaling bullish bias for the first time since August 2008, as discussed yesterday.
Further, BTC’s persistent defense of the 100-day MA line placed below $3,700 in the last nine days has weakened the high-volume bearish outside reversal witnessed on Feb. 24.
So, the doors look open for BTC to revisit $4,000 – more so, as a shorter duration technical chart is showing a bullish continuation pattern. As of writing, BTC is trading at $3,840, representing 3 percent gain on a 24-hour basis.
Bitcoin’s strong bounce from the 100-day MA support line seen in the above chart has strengthened the bullish appeal of the long-tailed doji candle created on Feb. 27.
Prices could soon rise above $3,897 – high of the doji candle with long upper shadow created on Feb. 28. That would further raise the odds of a rally to the psychological hurdle of $4,000.
Further, the 100-day moving average (MA) is now flatlined (has shed bearish bias), which adds credence to the long-term bearish exhaustion signaled by the longer duration indicators.
The bull flag breakout seen in the above chart indicates that the rally from lows below $3,700 seen on Monday has resumed and could yield a rally to $4,040 (target as per the measured move method).
Supporting that bullish case is the relative strength index (RSI) of 67.00.
Watch out for a failed breakout though, as that would take the shine off the bounce from the key support at $3,700 and weaken the immediate bullish case.
That said, a bearish reversal would be confirmed only if prices find acceptance under $$3,658 (low of the long-tailed doji on the daily chart).
Disclosure: The author holds no cryptocurrency assets at the time of writing.
Author: Omkar Godbole