This Price Hurdle May Pave Way for Bitcoin’s Next Leg Up

Omkar Godbole
Apr 16, 2019 at 11:00 UTC
Updated Apr 16, 2019 at 11:15 UTC
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  • Bitcoin’s rally from April 2 lows below $4,200 has stalled near the three-day chart’s 100-candle moving average (MA), currently at $5,238.
  • A three-day close (UTC) above that MA level could invite buying pressure, leading to a sustained move higher toward $5,500 and more.
  • That bullish close, however, looks unlikely in the short-term, as the cryptocurrency has created a bearish candle on the daily chart, validating signs of bull exhaustion (doji candle) on the weekly chart.
  • A UTC close below $4,948 today would add credence to yesterday’s bearish candle, opening doors for a deeper pullback toward the 30-day moving average, currently at $4,550.

The stalled bitcoin (BTC) rally could again pick up the pace if a new resistance level above $5,200 is convincingly breached.

The market-leading cryptocurrency picked up a strong bid at lows below $4,200 on April 2 and jumped to 4.5-month highs above $5,300 on April 8, confirming a bullish reversal.

The rally, however, has stalled in the last few days, courtesy of overbought conditions and other factors, as discussed yesterday.

Notably, the three-day chart’s 100-candle moving average (MA), currently at $5,238, has been proving a tough nut to crack since April 2. As a result, that lesser-known average is now the level to beat for the bulls.

A convincing move above that MA resistance could bring in more buyers, reviving the prospects of the further rally.

As of writing, bitcoin is trading at $5,080 on Bitstamp, representing a 1.5 percent drop on a 24-hour basis.

3-day chart

The 100-candle moving average has recently been put to test for the first time since May 2018. Back then, the average was trending north, indicating a bullish setup and was located just above $8,400.

As of writing, it is sloping downwards, representing a bearish bias, and is seen at $5,238. That bearish signal, however, is of little concern to the bulls, as longer duration averages are lagging indicators.

That said, bitcoin has repeatedly failed to secure a three-day close above that average over the last 15 days. A break higher, therefore, may embolden the bulls and allow a sustained move higher toward $5,500.

That, however, looks unlikely in the short-run, as the repeated failure at the 100-candle MA is accompanied by early signs of bearish reversal on the shorter duration charts.

Daily chart

BTC created a bearish outside reversal candle Monday – a pattern that occurs when the day begins on an optimistic note, but ends with pessimism. The candlestick is widely considered a sign of potential trend reversal, especially when it appears after a notable rally, as is the case with BTC.

Traders, however, wait for confirmation in the form of strong follow-through, preferably a close below the candle’s low.

So, a UTC close below $4,948 (Monday’s low) would shift risk in favor of a deeper drop toward the ascending 30-day MA, currently at $4,550. It is worth noting that the 30-day MA served as strong support throughout last month.

A bearish close below $4,948 looks likely, as the 5- and 10-day MAs have produced a bearish crossover, validating the signs of buyer exhaustion seen on the weekly chart (last week’s candle was a doji).

That said, the longer duration outlook will remain bullish as long as prices are trading above $4,236.

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

Bitcoin image via Shutterstock; charts by Trading View

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This article is intended as a news item to inform our readers of various events and developments that affect, or that might in the future affect, the value of the cryptocurrency described above. The information contained herein is not intended to provide, and it does not provide, sufficient information to form the basis for an investment decision, and you should not rely on this information for that purpose. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.