Thursday’s technical charts showed Bitcoin (BTC) was working its way through the key supply zone above $7,500 heading towards testing the resistance at $7,870 by the end of Friday.
The cryptocurrency looked primed for a corrective rally on Thursday; this after it had created a bullish rally earlier in the week. There were difficulties absorbing supply around 50-candle moving average (MA) on the 4-hour chart that was at $7,550 yesterday.
The diamond pattern experienced a downside break as there was a repeated failure to beat the moving average hurdle. The subsequent sell-off ran out of steam at $7,270, and led to a convincing move above the 50-candle MA, seen yesterday at $7,441.
At the time of writing, BTC was changing hands at $7,535 on Bitfinex, up 0.6 per cent over 24 hours. It looks ready to test the falling pattern resistance found at $7,870.
There is a bullish pattern as a higher low was established from the recovery from $7,270 to $7,570. This adds credence to Tuesday’s bullish outside-day candle and bullish price- relative strength index (RSI) divergence.
BTC could now test supply around $7,870 – resistance of trend line going down from the May 6 high and May 21 high.
This also means that the cryptocurrency will most probably go above the all-important 50-week MA, which is now at $7,711. It is only a weekly close above that level would signal a bearish trend.
The chart shows that the weekly candle had closed below the 50-week MA. This happened for the first time since October 2015, in the theory indicating the end of the long-term Bull Run.
Inspire of the bullish set up, there is an advantage in being cautious as the major moving averages – 50, 100 and 200 – on the 4-hour chart are also biased to the bears, likewise the 10-day MA.