Golden bitcoin

Bitcoin Price Charts Indicate Glimmer of Hope for Corrective Rally

Omkar Godbole
Dec 12, 2018 at 11:15 UTC
markets

Bitcoin’s (BTC) struggle to build a notable bounce could end if prices beat key resistance above $3,600.

The leading cryptocurrency by market value fell to 15-month lows near $3,200 last week, pushing the 14-week relative strength index (RSI) below 30.00 for the first time since 2015.

So, with bitcoin so extremely oversold, a recovery rally cannot be ruled out – more so because there is evidence of bargain hunters challenging the bears’ resolve to push prices lower.

For instance, BTC posted a three-day candle on Dec. 8 that closed below support at $3,463 (low of multiple three-day candles in September 2017), bolstering the already bearish technical setup. Despite that, BTC not only avoided a drop to $3,000 in the last 72 hours but also hit a high of $3,633, if briefly.

Nevertheless, the fact that prices were able to defy the bearish setup indicates that the bulls are beginning to flex a little muscle.

Therefore, a stronger rally could unfold if prices manage to cross the newfound resistance of $3,633 in the next 48 hours or so.

As of writing, BTC is trading at $3,414 on Bitstamp, having clocked a low of $3,325 earlier today.

3-day chart

As seen above, bitcoin has charted an “inverted hammer” candle, which occurs when prices see a brief rally during a downtrend. It is widely considered a sign of potential trend reversal.

The bullish reversal, however, would be confirmed if the follow-through is positive, that is, the current 3-day candle needs to close above $3,633 on Friday.

That could see prices open up upside toward the psychological resistance of $4,000.

Daily chart

On the daily chart, the 14-day RSI has posted a higher low as opposed to the lower low on price, meaning the indicator is diverging in favor of the bulls.

However, again, a high-volume move above $3,633 is needed to confirm a short-term bullish reversal.

View

  • A convincing move above $3,633 would validate the inverted hammer candle seen in the 3-day chart and open the doors for a stronger corrective rally to $4,000.
  • A break above $3,633 would also confirm a bullish divergence of the 14-day RSI and open up upside on the daily chart toward $4,400 (Nov. 29 high).
  • A break below the recent low of $3,210 would reinforce the overall bearish view, although oversold conditions on the 14-week RSI could limit the downside around $3,000.

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

Bitcoin image via Shutterstock; charts by Trading View

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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.