Above $4,300: Bitcoin Is Up, But Is It Out of the Woods?
Bitcoin is showing signs its price is on the up, but analysis suggests there are more hurdles on the charts before it can push to new highs.
Oct 5, 2017 at 1:12 p.m. UTC:format(webp)/cloudfront-us-east-1.images.arcpublishing.com/coindesk/36W7TH7U3FBIXHMRLD5MBTWQRM.jpg)
Credit: Shutterstock
Credit: Shutterstock
The bitcoin-US dollar (BTC/USD) exchange rate is gaining altitude after the bearish Doji reversal seen earlier this week failed to keep the cryptocurrency below its 50-day moving average.
At press time, bitcoin is trading at $4,325; up 1.46 percent as per data from CoinMarketCap. The two-day sell-off ran out of steam earlier today at the low of $4,150. The subsequent rebound then gathered pace above the 50-day moving average of $4,187.
However, the rebound from the 50-day moving average support seen in the one hour indicates the fears over the event are overblown. So, is bitcoin set to fly high or is the rally a bull trap?
The price action analysis suggests the cryptocurrency is currently hovering in the no man's land.
Daily chart
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A solid rally from the 50-day moving average support, though encouraging, is not enough. BTC needs to take the rising trend line, in which case the odds of a rally to $4,700 levels would improve significantly.
4-hour chart
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was confirmed on Tuesday. Today's rally from the low of $4,150 to $4,325 adds credence to the argument that moving average crossovers tend to work after a time lag.
Bearish Scenario - Potential Head and Shoulders
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But while there's reason for optimism, bitcoin is not out of the woods yet. Investors need to watch out for a failure at the resistance offered by the rising trend line as it could lead to a head and shoulders pattern.
Head and shoulders formation consists of a left shoulder, a head, and a right shoulder and a line drawn as the neckline. A break below the neckline indicates a bearish trend reversal.
View
- An end of the day close above the rising trend line would open doors for a rally to $4,700
- Meanwhile, a failure to take the rising trend line followed by a break below the head and shoulders neckline support of $4,170 would open up downside towards $3,870.
Teddy bear image via Shutterstock
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