- Bitcoin is looking north, with the hourly chart reporting a golden cross.
- Key resistance at $8,820 could be put to test over the next few days.
- On the downside. $7,800 is the level to beat for the bears.
A widely tracked short-term bitcoin price indicator has turned bullish, strengthening the case for a test of key resistance above $8,800.
The cryptocurrency’s 50-hour moving average (MA) has crossed above the 200-hour MA, confirming what is popularly known as “golden cross” – a bullish indicator.
MA studies are based on backward-looking data and tend to lag prices. A golden cross, therefore, is widely considered as a lagging indicator, especially when it appears on longer duration charts. However, the crossovers on the hourly and other short duration charts follow prices more closely and are thus more reliable as trend indicators.
For instance, BTC drew bids and rose from $8,150 to $8,820, extending the recovery from $7,800 following the Oct. 9 golden cross on the hourly chart.
On similar lines, the latest bull cross may accelerate the ongoing recovery rally, pushing prices higher to $8,820 – a bearish lower high created on Oct. 11.
As of writing, BTC is changing hands at $8,280, representing a 0.53 percent gain on a 24-hour basis.
As discussed, the 50- and 200-hour MAs have produced a golden cross, bolstering the bullish setup, as indicated by the inverse head-and-shoulders breakout.
The chart is also showing a bull flag breakout – a continuation pattern which accelerates the preceding rally.
The flag breakout has opened the doors for $8,700 (target as per the measured move method).
The bullish case is supported by an above-50 reading on the relative strength index (RSI).
Bitcoin’s repeated defense of $7,850 – the 38.2 percent Fibonacci retracement of the rally from December 2018 low to June 2019 high – indicates seller exhaustion.
A similar message is being sent by the MACD histogram’s higher lows below the zero line.
Bitcoin is closing on the 21-day exponential moving average (EMA), which proved a tough nut to crack on Sunday and Monday. The level previously capped upside on Oct. 9 and Oct. 10. Further, the cryptocurrency’s inability to hold above that average on Oct. 11 was followed by a drop to $7,800.
This time roun, the stiff resistance, currently at $8,318, looks likely be breached, with the hourly chart reporting a bullish setup amid signs of seller exhaustion on the three-day chart.
All-in-all, BTC looks set to challenge the bearish lower high of $8,820. A UTC close above that level is needed to confirm a bearish-to-bullish trend change, as discussed yesterday.
Disclosure: The author holds no cryptocurrency assets at the time of writing.
Author: Omkar Godbole