- Bitcoin’s 14-week relative strength index (RSI) has moved above the key resistance range of 53.00–55.00, validating the longer-term bullish reversal signaled by a falling channel breakout witnessed two weeks ago.
- As a result, BTC may rise to the former support-turned-resistance of $6,000 over the next couple of months.
- A pullback to the 200-day MA, currently located just below $4,500, may precede such a rise.
- The cryptocurrency is teasing a falling channel breakout on the hourly chart, which, if confirmed, could see prices revisit recent highs above $5,460 in the next day or two.
With a widely-followed price indicator now signaling a long-term bullish reversal, bitcoin (BTC) could extend its recent rally to $6,000 over the next couple of months.
Notably, the 14-week relative strength index (RSI) – an indicator used to identify overbought or oversold conditions – has found acceptance above the key 53.00–55.00 resistance range, which had served as strong support in the 2015–2017 bull market.
Essentially, the indicator has jumped back to bull market territory, reinforcing the longer term bullish reversal first confirmed by bitcoin’s violation of a bearish lower highs and lower lows pattern on April 2.
As a result, BTC may challenge the former support-turned-resistance of $6,000 in the near term.
As of writing, the crypto market leader is changing hands near $5,300 on Bitstamp, representing a 0.20 percent gain on a 24-hour basis. Prices have been largely restricted to $4,900–$5,500 range since April 3 and may see a pullback before prices rise to $6,000.
As seen above (left), the 14-week RSI has found acceptance above the resistance range of 53.00-55.00.
While a reading above 50 indicates bullish conditions, the weekly RSI established the 53.00-55.00 range as the make-or-break level during the 2.5-year bull market that topped out in December 2017 at a record high of $20,000.
At no point during the bull market were the bears strong enough to push the RSI below 53.00. Further, the RSI’s break below 53.00 in January 2018 was followed by a bear market that saw prices slide to lows near $3,100 by December.
Also, note how the RSI’s repeated rejection of attempts to climb back above 53.00 in the five months to October 2018 was followed by a high-volume drop below $6,000 on Nov. 14.
So, with RSI now having found acceptance above 55.00, the longer-term bearish-to-bullish trend change confirmed by a falling channel breakout two weeks ago looks to have legs, and BTC could rise to the former support-turned-resistance of $6,000 over the next couple of months.
Backing that argument are the 5- and 10-week moving averages (MAs), which are sloping upwards in favor of the bulls for the first time since early December 2017. These bullish averages, currently located at $5,045 and $4,505, may act as brakes on any pullbacks going forward.
Signs of bullish exhaustion have emerged on the daily chart. For instance, BTC created a doji candle on Friday and remained more or less flat-lined over the weekend. The case for a deeper pullback, however, would strengthen only if the recent low of $4,934 is breached.
A break below that level cannot be ruled out, as markets often test the bulls’ resolve immediately after a major breakout. For instance, the 100-day MA hurdle, which was breached on Feb. 19, was put to test multiple times in the 10 days to March 4 before a sustained move higher.
On similar lines, BTC may revisit the 200-day MA, currently at $4,482, before rising further.
The cryptocurrency, however, may pick up a bid in the next 24 hours, if the bearish pattern seen in the chart below is violated.
Currently, BTC is flirting with the upper edge of a bearish channel, having invalidated both a bearish divergence of the RSI and a falling wedge breakdown with repeated defense of support at $5,170 last week.
The channel breakout, therefore, looks likely and could be followed by a retest of the recent high of $5,466.
On the downside, a break below $5,170 would shift risk in favor of a drop to the recent low of $4,912.
Disclosure: The author holds no cryptocurrency assets at the time of writing.
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