[Flickr / <a href="https://www.flickr.com/photos/revdave/463610938/in/photolist-GY8o3-fdTQxU-jL9LNX-7w6XwL-bzCtcn-my6DVw-84VQLx-cN1T2q-8nvLAj-Go96Ld-8TUMZ-n4A1vE-9LACQ4-6qncZL-99AihH-6uj62b-H9y4B-bmHArb-idE3hg-bzCuBV-bzCume-bmHD9Y-cd8S1Q-5eqdDh-9HbqHm-bzCvr4-bXdvNX-5fdBXy-bmHEi1-8fdmSc-4FDB1G-6Dzm17-6DzkY1-bmHDny-bzCtVt-bzCwDr-c1JBUY-bzCtGR-bzCu7t-rhoPuC-m71BSk-4e7vch-5DTofF-c1JBAG-8oLEAL-c1JBdW-c1JCg7-bmHCkN-oeAyh-bmHB2j">David Morris</a>]

An Old Resistance Hurdle Is Back and Could Stall Bitcoin’s Price Rally

Omkar Godbole
Mar 18, 2019 at 11:01 UTC
Updated Mar 18, 2019 at 13:28 UTC
markets

View

  • Bitcoin clocked highs above $4,000 over the weekend and closed last week on a positive note, strengthening the short-term bullish outlook.
  • The ongoing recovery rally, however, could pause around $4,000 or fall back to key support levels lined up at $3,775 and $3,658, as the bearish (downward sloping) 21-week simple moving average (SMA) is currently lined up at $4,073. That SMA served as a stiff resistance last year.
  • Bitcoin’s outlook as per the daily chart would turn bearish if prices see a UTC close below the Feb. 27 low of $3,658. That would open the doors for a re-test of lows near $3,300 seen at the end of January.

Bitcoin’s (BTC) four-week price rally now faces a former support-turned-resistance level that repeatedly capped gains in 2018.

The crypto market leader closed (UTC) yesterday at $3,965, representing a 1.73 percent gain on a weekly basis, according to Bitstamp data. That was the fourth straight weekly gain and the longest winning streak since April 2018.

With strong volumes backing bitcoin’s move to a three-week high of $4,040 over the weekend, the case for an extension of the ongoing recovery rally from January lows looks strong.

However, a long-term bearish-to-bullish trend change above $4,236 may remain elusive for few weeks, as the 21-month simple moving average (SMA) – a technical line which acted as strong resistance in 2018 – is currently located at $4,073.

More importantly, the average line is still trending south in favor of the bears, and bitcoin is not likely to breach it with a 90-degree rally.

Further, with BTC struggling to hold on to gains above $4,000 for the third day running, the bullish momentum is beginning to wane.

As of writing, the BTC is changing hands at $3,955 on Bitstamp, having hit a high of $4,016 earlier today.

Weekly chart

On the weekly chart, bitcoin printed bullish higher lows along the 21-week SMA throughout the 2016-2017 uptrend. The average support was breached on Jan. 29, 2018, and has reversed rallies ever since.

As such, a convincing move above that SMA, currently at $4,073, could be considered an early sign of a long-term bullish reversal.

It is often observed that markets tend to consolidate post-break above a downward sloping MA and pick up a strong bid once the average has shed bearish bias (bottomed out).

For instance, BTC jumped above the descending 100-day MA on Feb. 19, but the follow-through quickly fizzled out near $4,200 and prices fell back to the long-term MA on March 4. More importantly, bitcoin lacked clear directional bias and rose back to $4,000 only after the average turned flat on March 14.

Thus, any break above the 21-week SMA needs to be viewed with caution as long as the average line is trending south. A repeated rejection at the average line could invite selling pressure, as seen in November.

Daily chart

On the daily, BTC closed above $3,950 (Mar. 9 high) on Saturday, bolstering the short-term bullish setup as indicated by both the ascending trendline and the upward sloping 5- and 10-day MAs.

So far, however, the follow-through has been anything but bullish, which adds credence to the possibility of a pause in upward momentum suggested by the weekly chart.

Disclosure: The author holds no cryptocurrency assets at the time of writing.

Bitcoin image via Shutterstock; charts by Trading View

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.


This article is intended as a news item to inform our readers of various events and developments that affect, or that might in the future affect, the value of the cryptocurrency described above. The information contained herein is not intended to provide, and it does not provide, sufficient information to form the basis for an investment decision, and you should not rely on this information for that purpose. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.