Bitcoin hit a new record high of $5,856 on CoinDesk's Bitcoin Price Index this morning, but the question everyone will be asking is, can the rally continue?
At press time, bitcoin is trading at $5,610 levels, as per CoinMarketCap data. Bitcoin's week-on-week performance of over 28 percent (up more than $1,200,) is double S&P's year-to-date gains of 14 percent.
Further, the cryptocurrency is up 96 percent from its Sept. 15 low of $2,980, and, on a year-to-date basis, is up almost 500 percent.
Following a rally of such astonishing proportions, it would be quite logical to assume bitcoin prices will trade sideways, or witness a healthy pull-back in the short run
The price action analysis indicates that bitcoin could find a short-term top in the range of $5,800-$6,000.
The daily chart shows that:
- Bitcoin's price suffers a corrective pull back every time the stochastic and the relative strength index (RSI) signal overbought conditions (marked by hand sign and red circles on the chart). The stochastic oscillator is a chart analysis indicator that helps determine where a trend might be ending.
- The trend line drawn from the July 16 low and Aug. 22 low and extended further is seen offering resistance around $6,100 levels.
- Though overbought, the RSI is still rising. Meanwhile, the stochastic is looking to retreat from the overbought territory.
- A technical correction would gather pace once the RSI starts losing altitude.
- A short-term consolidation around $5,800 or brief spike to $6,000 followed by a short-term pull back to $5,000-$5,300 looks more likely.
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