Bitcoin Probes Major Resistance After 15 Percent Price Rally

Bitcoin's recent gains have led to a bullish chart breakout and brought a key long-term price resistance into play for the first time in over two months.

Jan 7, 2020 at 11:00 a.m. UTC
Updated Sep 14, 2021 at 1:51 p.m. UTC

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  • Bitcoin has tested the historically strong 100-day average resistance for the first time in over two months.
  • An inverse head-and-shoulders breakout on the daily chart along with bullish short-term indicators suggest scope for a convincing move above the 100-day hurdle at $7,945.
  • A break higher would strengthen the case for a rally to $8,700.
  • The long-run outlook remains neutral with bitcoin still trapped in a falling channel on the weekly chart.

A long-term bitcoin price resistance has come into play for the first time in two months.

The widely-tracked 100-day moving average (MA), currently located at $7,945, was breached in the early Asian trading hours, according to Bitstamp data. The move, however, ran out of steam at $8,000 and prices soon fell back below the major hurdle.

At press time, bitcoin is changing hands at $7,870 on Bitstamp, representing a 14.8 percent gain from Friday's low of $6,853. The global average price, as calculated by CoinDesk's Bitcoin Price Index, currently stands at $7,860 – up 4.6 percent on a 24-hour basis.

The 100-day MA last came into play at the end of October. Back then, a UTC close above the average line had remained elusive for three straight days, starting from Oct. 26 to Oct. 28, as seen below.

CoinDesk - Unknown

The sharp rise from Oct. 26 lows near $7,400, which many linked to China's President Xi's encouraging comments on blockchain technology, ended with rejection above the 100-day average (marked by a circle).

Essentially, bitcoin charted a bearish lower high with the failure at the average hurdle and ended up falling to lows below $6,500 in December.

Hence, the 100-day MA at $7,945 is the level to watch out for in the next 24 hours. A UTC close higher will likely invite stronger buying.

Technical charts indicate the odds are stacked in favor of a convincing move above the crucial average resistance.

Daily chart
CoinDesk - Unknown

Bitcoin jumped 5.52 percent on Monday, confirming an inverse head-and-shoulders breakout on the daily chart.

The bullish reversal pattern has opened the doors for a rise to $8,735 (target as per the measured move method).

The breakout is backed by ascending (bullish) 5- and 10-day averages. Further, the 14-day relative strength index is hovering at 63.51, the highest level since Oct. 27, indicating strengthening bullish bias.

The short-term bullish case would weaken if prices find acceptance under the former resistance-turned-support of the inverse head-and-shoulders neckline, currently at $7,586, although looks unlikely at press time.

Weekly chart
CoinDesk - Unknown

The head-and-shoulders breakout on the daily chart has confirmed the seller exhaustion signaled by a hammer candle created in the seven days to Dec. 22 and last week's doji candle.

A bullish breakout on the weekly chart would be confirmed only if and when the six-month falling channel is breached to the higher side. Currently, the channel resistance is located at $8,000.

Disclosure: The author does not currently hold any digital assets.


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