Indicator Suggests Bitcoin's $8K Price Rally Could Be Overstretched
Bitcoin bulls could have a breather after 40 percent month-on-month rally.
![shutterstock_661148188](https://www.coindesk.com/resizer/W95abzdq56Av3VTMzNLj4v2Ck9Q=/567x399/filters:quality(80):format(jpg)/cloudfront-us-east-1.images.arcpublishing.com/coindesk/R3253KSFDBDZRCSAJWIQ7LZXMI.jpg)
Bitcoin (BTC) has had a bullish start to the week, but the momentum could wane in the next few days, technical studies indicate.
The leading cryptocurrency rose to a two-month high of $8,130 on Bitfinex today, having witnessed an inverse head-and-shoulders breakout last week.
The 40 percent rally from the seven-month low of $5,755 reached on June 24 has put the bulls back in a commanding position. Hence, further gains could be on the cards, albeit after a brief pause or a price pullback as a key technical indicator is flashing overbought conditions.
At press time, BTC is changing hands at $8,100 on Bitfinex.
Daily chart
![bitcoin-daily-chart-3](https://www.coindesk.com/resizer/vlgLHA5h9P9RdJuBCIkp2eiLChw=/560x253/filters:quality(80):format(jpg)/cloudfront-us-east-1.images.arcpublishing.com/coindesk/RTGIFMRSPZECPOM7JMHAIMFNV4.png)
Notably, the relative strength index (RSI), one of the most widely used momentum indicators, jumped above 70.00 (overbought zone) earlier today and is currently located at 74.56 – its highest level since December.
So, it could be said that bitcoin is at its most overbought level in seven months.
As a result, the cryptocurrency may find it hard to gain a foothold above the immediate resistance of $8,140 (pennant resistance) in the next few days and could see a minor price pullback.
That said, a technical correction, if any, will likely be short-lived as the other tools are biased towards the bulls. For instance, the 5-day and 10-day moving averages (MAs) are trending north, indicating a bullish setup.
Meanwhile, the short duration charts are also calling a further price rally.
4-hour chart
![coindesk_default_image.png](https://www.coindesk.com/resizer/ROGtoJBJsqGSAMsxT1gzYe1D-bE=/560x560/filters:quality(80):format(jpg)/cloudfront-us-east-1.images.arcpublishing.com/coindesk/3UTBLGFDXJBK3AFH2BFSWPODZQ.png)
The broadening wedge breakout seen on the chart above indicates a continuation of the rally from the July 17 low of $6,740. Accordingly, the attention has now shifted to the significant price obstacle of the 200-day MA, currently located at $8,676.
View
- BTC's break above $8,000 has bolstered the already bullish technical setup, however, overbought conditions could cap the upside around $8,150 over the next few days.
- A pullback to ascending (bullish) 10-day MA, currently at $7,570 and seen sloping upwards to $7,700 in the next 48 hours, cannot be ruled out but will likely end up refueling the BTC freight train for a sustained move toward the 200-day MA of $8,676.
- Only a daily close (as per UTC) below $7,221 (July 21 low) would abort the bullish view.
Disclosure: The author holds no cryptocurrency assets at the time of writing.
Steel spring image via Shutterstock; Charts by Trading View