Bitcoin's (BTC) three-day winning streak is encouraging for the bulls, but only a quick move above $10,500 would negate the risks of the so-called "death cross."
Having bottomed out at $7,335 on Sunday, prices on CoinDesk's Bitcoin Price Index (BPI) rose to $9,127 today - the highest level since March 14. As of writing, the BPI is seen at $9,074. The retreat from the intraday highs could be associated with the signs of bearish relative strength index divergence seen on the hourly chart.
The 22.7 percent recovery from $7,335 suggests the bulls have regained control, at least for the time being. However, the cryptocurrency is not out of the woods yet, the long duration technical studies indicate.
To start with, the cryptocurrency is still in a downtrend as indicated by the trendline sloping downwards from the Dec. 17 high and Jan. 6 high is intact. And furthermore, the imminent and scary-sounding "death cross" - when the 50-day moving average (MA) will cut the 200-day MA from above - could throw a spanner in the works.
The above chart shows (prices as per Bitfinex) that bitcoin will encounter a number of points of stiff resistance in the $9,180-$9,470 range:
- The 200-day moving average is seen at $9,181.
- Double top neckline resistance (former support) stands at $9,280 (Feb. 25 low).
- The 50-day moving average resistance is seen at $9,449.
- 50 percent Fibonacci retracement of the recent drop is $9,470.
A clear break above $9,470 would provide more power to the bulls. That said, the weekly chart indicates a bullish trend reversal only above $11,700.
Hence, the bulls require at least a quick and a convincing break above $10,500 (long-term descending trendline resistance).
Failure to do so will likely result in the 50-day MA cutting the 200-day MA from above (the death cross mentioned above). As discussed on Monday, the death cross is not a reliable indicator, as the major portion of the sell-off has already happened (RSI shows oversold condition) by the time the crossover is confirmed.
However, the death cross could bring a sell-off in this instance, given the RSI is below 50.00 (in the bearish territory), but holding well above 30.00 (oversold territory).
- A quick break above $10,500 would open doors for a bullish trend reversal (move above $11,700).
- Consolidation around $9,000 could end up triggering another sell-off. In such a scenario, prices could revisit the February low of $6,000.
- The longer it takes for BTC to take out $9,180-$9,470, the higher will be the risks of the "death cross," given the weekly chart is biased to the bears.
Bitcoin chart image via Shutterstock