- Bitcoin has bounced back to $8,000, forming a double bottom breakout – a bullish price pattern – on the 4-hour chart.
- The price breakout has opened the doors to $8,400. On the way higher, BTC may face resistance at $8,350.
- A rally to $8,350, if any, could be short-lived if trading volumes remain low.
- A break below $7,432 (June 4 low) would revive the case for a drop to the 50-day moving average at $6,915.
Bitcoin has recovered to $8,000 after defending key support for two consecutive days and may remain well bid over the weekend.
The leading cryptocurrency by market value is currently trading at $7,990 on Bitstamp, having hit a high of $8,020 earlier today.
BTC ran into offers around $7,900 in the early U.S. trading hours on Thursday and fell back to $7,450. However, much like Wednesday, the drop below the 4-hour chart’s 200-candle moving average (then located at $7,588) was short lived.
With the rise back to $8,000, the cryptocurrency has charted a bullish technical pattern on one of the short-duration charts. As a result, the recovery rally may continue, with prices rising to $8,400 over the weekend.
The weekly close (Sunday, as per UTC) will also be key. BTC witnessed solid two-way business last week before ending on a flat note, a sign of indecision among buyers. A short-term bearish reversal would be confirmed if prices close below last week’s low of $8,000 on Sunday.
Bitcoin’s previous 4-hour candle closed out just above the resistance of $7,924, confirming a double-bottom breakout.
The pattern essentially represents a bearish-to-bullish trend change. So, it seems safe to say the pullback from the May 30 high of $9,097 has ended and the path of least resistance is now to the higher side.
It’s worth noting that a double-bottom breakout is usually followed by a move higher by roughly the length of the spread between the bottom and the neckline – in this case from $7,450 to $7,924, giving potential a rise of around $470.
So, with breakout already confirmed, BTC could climb toward $8,400 over the weekend. On the way higher, BTC may face resistance at $8,350 – the upper edge of the falling channel representing bearish lower highs and lower lows.
The rally, however, could be short lived if trading volumes remain anemic. As the above chart shows, trading volumes are locked in a downtrend despite the price recovery.
BTC created a long-tailed doji candle on Thursday amid falling volume bars – another sign the pullback may be over.
That said, the outlook would turn bullish only if prices see a high-volume UTC close above the 4-hour chart falling channel resistance, currently at $8,350. A channel breakout, if confirmed, would open the doors to $9,000.
On the downside, the June 4 low of $7,432 is the level to beat for the bears. A violation there would put the focus back on the bearish divergence of the RSI and the downward sloping 5- and 10-day MAs and allow for a deeper drop to the 50-day MA at $6,915.
The long-term outlook will remain bullish as long as prices hold above the May low of $5,263.
Disclosure: The author holds no cryptocurrency assets at the time of writing.
Author: Omkar Godbole