Overbought? Bitcoin Eyes $12k, But Correction Possible
Bitcoin may soon move to fresh all-time highs above $12,000, but there are still signs of a possible correction ahead.
Bitcoin may soon move to fresh all-time highs above $12,000, but signs of trader fatigue are still evident, price chart analysis suggests.
Prices of the cryptocurrency have already neared Sunday's record high of $11,831 this morning, reaching $11,793 at around 08:00 UTC, as per CoinDesk's Bitcoin Price Index (BPI). At time of writing, bitcoin has dropped back a little to $11,649.
Looking at CoinMarketCap data, bitcoin (BTC) has gained 4.18 percent in the last 24 hours, and 18% over the last 7 days.
Importantly, the bulls scored a brownie point yesterday by ensuring that bitcoin closed (as per UTC) above last week's highs near $11,500. While prices did hit the new high of $11,831 Sunday, the day's close was below previous record highs – a sign of bull market exhaustion.
A close above last week's high (doji candle/previous record high) indicates a continuation of the rally, indicating that bitcoin may hit fresh record highs above $12,000 in the next 24–48 hours.
Still, the odds of a pullback remain high, with the daily relative strength index (RSI) showing overbought conditions (above 70.00) for the 10th consecutive day.
The above chart shows:
- Potential double top reversal with neckline level of $10,950.
- Of late, volumes have remained low during the rally, while bouts of sell-off have been accompanied by a big jump in volumes (marked by circles). A high volume retreat in prices indicates potential for a correction.
- Although bitcoin's price is forming higher lows, the RSI is losing altitude, also indicating scope for a pullback.
Formed at the top of the bull market, a double top is a bearish reversal pattern comprising two consecutive peaks that are roughly equal, with a moderate trough in-between.
A break below the neckline support ($10,950) confirms a bearish reversal. If the 4-hour candle closes below $10,950, prices may fall back to $10,100 (target as per the measured-height method).
Bitcoin could set fresh record highs above $12,000, as imminent BTC futures listings from CME and the CBOE are seen as opening doors for institutional investors.
However, chart studies still suggest that a healthy pullback to $10,000 is possible.
However, only an end of the day close below $10,000 (rising trendline support on the 4-hour chart) would indicate a temporary top has been made. In that scenario, prices could then test $8900-8,600 levels.
Climber on peak image via Shutterstock
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