View

  • Bitcoin's low-volume price consolidation has taken the shape of a bull flag on the 4-hour chart. A break above $3,930 would confirm a flag breakout and open the doors to $4,330 (target as per the measured move method).
  • The flag breakout looks likely, as the longer duration charts are biased bullish: Monday’s high-volume triangle breakout is still valid, while a bullish crossover between the 5- and 10-day exponential moving averages (EMAs) on the 3-day chart indicates a positive shift in market sentiment.
  • Another failure to take out $4,000 could yield a pullback to the 100-day moving average, currently lined up at $3,782.

Bitcoin's three-day price consolidation looks to be a bull breather before a continuation of the recent rally to above $4,000.

The leading cryptocurrency by market value is currently trading largely unchanged on the day at $3,920 on Bitstamp. Notably, prices are trapped in a narrowing price of $4,000 to $3,860 for the third consecutive day.

As a result, traders may feel tempted to question the reliability of the high-volume triangle breakout, confirmed on Monday. The bearish-to-bullish trend change, however, will remain valid as long as prices are held above $3,614, as discussed yesterday.

Trading volumes have dropped 43 percent from the nine-month high of $9.93 billion seen on Tuesday, according to CoinMarketCap. So, the pullback from highs near $4,000 to $3,900 is likely nothing more than temporary bullish exhaustion.

Further, BTC seems to have created a bull flag pattern – a pause which often refreshes on the higher side – on the technical charts. Therefore, the cryptocurrency could soon pick up a strong bid and rise above $4,000.

4-hour chart

CoinDesk - Unknown

A 4-hour close above the upper edge of the flag, currently at $3,930, would confirm a bull flag breakout and open the doors to $4,330 (target as per the measured move method).

The RSI, currently at 63, is again reporting bullish conditions, as opposed to overbought readings seen three days ago.

Major averages – 50, 100 and 200 – are also trending north indicating a bullish setup.

Daily chart

CoinDesk - Unknown

On the daily chart, BTC has bounced upwards at the ascending 5-day moving average (MA), reinforcing the bullish view put forward by the short-term MA studies.

A high-volume break above $4,000 would bolster the already bullish technical setup and allow a rally to December highs above $4,200.

A less-likely close below Monday’s low of $3,614 would abort the bullish view.

Disclosure: The author holds no cryptocurrency assets at the time of writing.

Bitcoin image via Shutterstock; charts by Trading View

DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

Investing in the Future of the Digital Economy
October 18-19 | Spring Studio, NYC