Bitcoin’s ongoing recovery rally faces a major obstacle that could impede progress towards $5,000, according to the technical charts.

The leading cryptocurrency by market capitalization jumped to a two-week high of $4,108 earlier today, validating the short-term bearish-to-bullish trend change confirmed earlier this week.

Notably, the break above the psychological hurdle of $4,000 looks sustainable, as 24-hour trading volume has jumped to one-month highs above $8 billion.

As a result, more bargain hunters could join the party, creating further upward pressure on prices. Even so, the rally may stall near $4,400 for some time, as the area around that psychological level is packed with key technical lines.

As of writing, BTC is trading at $4,040 on Bitstamp, representing an 8 percent gain on a 24-hour basis.

Daily Chart

The above chart shows:

  • The 50-day exponential moving average is located at $4,402.
  • The bearish lower price high of Nov. 29 is seen at $4,410.
  • $4,430 is the 38.2 percent Fibonacci retracement of the sell-off from the Nov. 7 high to Dec. 15 low.

The relative strength index (RSI) on the hourly and 4-hour charts is now reporting overbought conditions, too.

All this combined, BTC will likely have a tough time scaling the stiff resistance zone of $4,400-$4,430 in a single attempt.

Moreover, a consolidation or a minor pullback from the current level of $4,040 will allow the RSI on the hourly and 4-hour chart to roll over from the overbought territory and realign in favor of the bulls. That, if confirmed, could ease BTC’s progress across the resistance zone.

As a result, the move past that crucial resistance could yield a quick rally to the next psychological barrier of 5,000

View

  • Bitcoin may find it hard to beat the resistance zone of $4,400-$4,430 in short-term.
  • A high-volume daily close above $4,430 could be followed by a quick move higher to $5,000.
  • The prospects of a rally to $4,400 would drop if BTC falls back below Wednesday’s high of $3,924.
  • A daily close below $3,633 would invalidate the bullish setup.

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.