- Bitcoin's weekly MACD has diverged in favor of the bulls. The indicator carved out a higher low in December, even though bitcoin's price slipped to $3,100, signaling waning bearish pressures 17 months before the mining reward halving. Bitcoin witnessed a similar MACD divergence 17 months before the previous halving in July 2016.
- The bullish MACD divergence indicates the cryptocurrency could be nearing a long-term bottom or may have carved out one near $3,100 in December. That said, a move above the 21-month exponential moving average (EMA), currently at $5,334, is needed to confirm a long-term bullish reversal.
- Bitcoin could rise above $4,000 if the inverse head-and-shoulders neckline, currently at $3,735, is breached. A downside break of the wedge pattern seen in the 4-hour chart could yield a re-test of $3,400.
A long-term price indicator validates a growing consensus among investors that bitcoin (BTC) is close to bottoming out.
BTC fell below $6,000 on Nov. 14, dashing hopes of a long-term bullish reversal from that long-held psychological support.
The subsequent sell-off came to a halt near $3,100 in December – 18 months ahead of the mining reward halving – triggering speculation that the cryptocurrency could bottom out in 2019. It is worth noting that BTC created a long-term bottom in January 2015 before undergoing a reward halving in July 2016.
That, however, could change in the near future, as the bitcoin’s moving average convergence divergence (MACD) – a momentum indicator based upon price moving averages – is signaling waning bearish pressures.
Bitcoin's weekly MACD, however, has diverged from the primary bearish trend, i.e. the price hit a lower low near $3,100 in December, while the MACD carved out a higher low. A bullish divergence is widely considered a sign of seller exhaustion and is often followed by trend reversal.
As of writing, BTC is changing hands at $3,570 on Bitstamp, having hit highs above $3,700 last week.
On the weekly chart, the MACD has produced a higher low in favor of the bulls. It is worth noting that a similar bullish divergence was charted over the five months leading up to January 2015, when BTC bottomed out near $150.
So, there is a reason to believe the cryptocurrency is nearing, or has already reached, a major bottom.
As a result, the probability of BTC witnessing a bullish reversal in the next few months is high. A convincing move above the 21-month exponential moving average (EMA) – a level which acted as strong support last year – would confirm a long-term bearish-to-bullish trend change. As of writing, that average is located at $5,334.
Meanwhile, the prospects of a short-term rally to $4,000 would improve if BTC clears the resistance at $3,735.
BTC has carved out a falling wedge pattern – a bullish continuation pattern – on the 4-hour chart. A move above $3,585 would confirm a wedge breakout and could yield a rally to $3,735, which is the neckline of the inverse head-and-shoulders bullish reversal pattern. A violation there would open up upside toward $4,100 (target as per the measured move method).
Disclosure: The author holds no cryptocurrency assets at the time of writing.
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