Bitcoin Price Pattern Hints at Short-Term Rally to $4K

Omkar Godbole
Feb 12, 2019 at 11:20 UTC
Updated Feb 12, 2019 at 12:07 UTC
markets

View

  • Bitcoin has backed off 4 percent from three-week highs seen on Friday, but looks to have formed a bull flag – a bullish continuation pattern – on the 4-hour chart.
  • A move above $3,630 would confirm a flag breakout and open the doors to $4,000 (target as per the measured move method).
  • Acceptance below the lower edge of the flag, currently at $3,546 would weaken the short-term bullish case. That, however, looks unlikely, as the path of least resistance is to the higher side, according to Friday’s high-volume falling wedge breakout.

Bitcoin’s overnight pullback from three-week highs hit on Friday doesn’t mean the rally is over.

The cryptocurrency is currently trading at $3,560 on Bitstamp, having clocked a three-week high of $3,711 on Feb. 8. The 4 percent correction was preceded by repeated failures at the 50-day moving average (MA) resistance, currently at $3,633.

Even so, the prospects of a stronger short-term rally toward $4,000 look strong, as the price pullback has carved out a bull flag on the technical charts. That pattern represents a pause, which often ends up extending the preceding bullish move.

A break above the upper edge of the flag, currently at $3,630, would confirm a breakout and could be followed by a rally to $4,000 (length of the preceding bullish move added to the breakout price).

4-hour chart

BTC’s move to highs above $3,700 on Friday confirmed a falling wedge breakout on the 4-hour chart. The short-term outlook, therefore, is bullish. Validating that positive development is a bull cross of the 50- and 100-candle moving averages.

Put simply, the bulls appear to be in control and could soon force a flag breakout.

It’s worth noting, though, if the bulls don’t act soon, then the flag’s horizontal length (duration) would exceed the pole’s height in the next few hours, deeming the bullish continuation setup invalid. The RSI has also dropped into bearish territory below 50 and the MACD (moving average convergence divergence) is close to turning negative.

So, the bulls need progress soon to stop BTC finding acceptance below flag support at $3,546. That would shift risk in favor of a drop to $3,400.

Daily chart

On the daily chart, the 5- and 10-candle MAs are trending north, indicating a short-term bullish setup.

A bull flag breakout, if confirmed, could yield a convincing move above the 50-candle MA – a level, which has acted as stiff resistance in the last 72 hours.

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.