Bitcoin Price Faces Minor Pullback as Indecision Creeps into Market

Omkar Godbole
Jan 9, 2019 at 11:01 UTC
Updated Jan 9, 2019 at 11:36 UTC
markets

With the bitcoin (BTC) market showing signs of indecision, prices could soon retreat back below $4,000.

The world’s largest cryptocurrency by market capitalization witnessed two-way business yesterday before ending largely unchanged on the day (as per UTC) at $3,995 on Bitstamp.

Worryingly for the bulls, BTC created a doji candle on Tuesday – widely considered a sign of indecision in the market – even though a bull flag breakout, witnessed yesterday, had seemingly set the stage for a move above $4,300.

Notably, the candlestick pattern appeared at the top of the recent recovery rally and near crucial resistance above $4,100, representing bullish exhaustion.

The bears, therefore, have an opportunity to make a slight comeback, especially if buyers fail to keep prices above the previous day’s low of $3,934.

As of writing, bitcoin is changing hands at $4,010 on Bitstamp, representing a 0.80 percent gain on a 24-hour basis.

Daily chart

As seen above, BTC has carved out a doji candle at the confluence of the 50-day exponential moving average (EMA) and the inverse head-and-shoulders neckline resistance.

The prospects of a bull breakout above $4,130 (neckline + 50-day EMA) would drop sharply if BTC confirms a bearish doji reversal with a UTC close below $3,934. That will likely put the focus back on the long-term bearish technical setup and allow a drop to $3,566 (Dec. 27 low).

It is worth noting that a drop towards $3,566 would imply inverse head-and-shoulders failure, which is widely considered a strong bearish signal.

Put simply, the bulls need progress soon. A UTC close above $4,130 would confirm an inverse head-and-shoulders breakout and open the doors for a stronger rally.

4-hour chart

BTC witnessed a bull flag breakout on the 4-hour chart yesterday, signaling a resumption of the rally from the Jan. 6 low of $3,753.

So far, however, a break above the inverse head-and-shoulders neckline resistance of $4,130 has remained elusive. That said, the bull flag pattern is still valid and would lose credibility only below the previous day’s low of $3,934.

View

  • Bullish exhaustion seen at the key hurdle above $4,100 could embolden the bears.
  • A UTC close below $3,934 could yield a drop to $3,566 (Dec. 27 low). A break below that level would violate the bullish-higher low pattern and expose the December low of $3,122.
  • On the higher side, $4,130 is the level to beat for the bulls. An inverse head-and-shoulders breakout, if confirmed, would invalidate yesterday’s doji and open up upside towards the psychological hurdle of $5,000.

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

Bitcoin chart 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.