- Bitcoin has retraced slightly from the one-year high of $8,940 reached earlier today.
- Any pullbacks could be short-lived, however, as buying pressure is currently the strongest in over five months, according to a weekly chart indicator.
- A pennant breakout on the daily chart indicates scope for a rally to $10,000 in the near-term. On the way higher, BTC may encounter resistance at the key Fibonacci level of $9,442.
- The bullish case would weaken if prices fall back below $8,000 in the next day or two.
Bitcoin (BTC) has pulled back from 12-month highs hit earlier today. However, the bulls are still firmly in control, with the price holding well above key support at $8,390.
The cryptocurrency market leader jumped to $8,940 on Bitstamp at 01:00 UTC today, the highest level since May 11, 2018.
The rally since then has faded somewhat, with the cryptocurrency currently trading at $8,750, representing a 9 percent gain on a 24-hour basis.
The $200 drop from intraday highs seen over the last nine hours is likely nothing more than a bull breather, often seen following a notable price gain. After all, BTC rose by 8.29 percent on Sunday – the fourth biggest single-day gain of May.
More importantly, the bulls finally managed to force a convincing break above $8,300, having failed at least three times in the preceding 11 days to hold on to gains above that psychological level.
Prices also found acceptance above the July 2018 high of $8,500 yesterday.
So, the rally from lows below $6,000 looks to have resumed and only a quick fall back below $8,000 would weaken the bullish case.
BTC closed well above the May 16 high of $8,390 on Sunday, confirming a pennant breakout – a continuation pattern that usually accelerates the preceding bullish move.
This type of breakout is often followed by a move upwards of roughly the length of the pennant's "pole" (the height of the preceding bull move) – in this case from $5,562 to $8,390).
BTC, therefore, has scope to rally at least to $10,000 (psychological resistance) in the near-term.
Supporting the bullish case is the Chaikin money flow index of 0.24 – the highest reading since April 10 – meaning that buying pressure is its strongest in nearly six weeks.
Further, the 5- and 10-day moving averages (MAs) are trending north, indicating a short-term bullish setup. As a result, these averages, currently located at $8,288 and $8,048, respectively, and may reverse price pullbacks, if any.
BTC’s four-week winning run is backed by five-month highs on the Chaikin money flow index – that is, buying pressure is currently the strongest since mid-December,
The 5- and 10-week MAs are also sloping upwards in favor of the bulls.
While the relative strength index (RSI) is reporting overbought conditions with an above-70 print, the cryptocurrency is showing no signs of bullish exhaustion. The RSI’s overbought signal therefore stands invalidated.
To conclude, BTC will likely break above $9,000 in the short-term and may rise to $9,442 – the 38.2 percent Fibonacci retracement of the sell-off from the December 2017 high to December 2017 low.
It's worth noting that prices are currently up more than 65 percent on a month-to-date basis. Pullbacks due to profit taking are usually observed following such stellar rallies.
As a result, the possibility of BTC revisiting the former resistance-turned-support zone of $8,390–$8,000 before rising to $9,442 cannot be ruled out.
On a year-to-date basis, bitcoin is now up 136 percent.
Disclosure: The author holds no cryptocurrency assets at the time of writing.
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