Bitcoin (BTC) is again trading in a narrowing price range above $6,400, but the lateral trading may soon give way to a rally, according to technical studies.
The price consolidation comes after Monday’s big spike to three-week highs above $6,800, which weakened the bearish case put forward by last Thursday’s violation of key support.
However, so far, a bullish follow-through has not materialized, possibly because buyers are waiting for a more credible evidence of bearish invalidation.
More importantly, a number of key resistance levels are still intact. For instance, BTC is yet to find acceptance above the 50-day exponential moving average (EMA) hurdle, currently lined up at $6,537. Further, BTC failed to close (as per UTC) above the trendline connecting the Sept. 28 high and Oct. 8 high on Monday and is currently trading well below that diagonal line. The Sept. 22 high of $6,823 is also a crucial resistance level, as discussed yesterday.
Should BTC clear these key obstacles, then the traders may feel convinced that the cryptocurrency has bottomed out again at the 21-month EMA support and could push prices higher toward long-term falling trendline resistance above $7,000.
The above scenario could play out if the three-day long narrowing price range (triangle pattern) is breached on the higher side. Interestingly, the momentum studies – moving averages – on the short duration charts are aligned for a break above the triangle resistance.
At press time, BTC is trading largely unchanged on the day at $6,440 on Bitfinex.
The 50-hour, 100-hour and 200-hour exponential moving averages (EMAs) are trending north, indicating a bullish setup. Further, the stacking order of the 50-hour EMA above the 100-hour EMA, above the 200-hour EMA is a classic bullish signal.
As a result, BTC is more likely to cut through the upper edge of the triangle, currently seen at $6,460.
The choppiness index has dipped below the 38.2 percent level, which means the cryptocurrency is more inclined towards a directional trend. So, it seems safe to say that triangle breakout, if confirmed, could yield a sharp move, higher possibly toward $6,800.
Over on the daily chart, BTC has cleared the trendline falling from July highs and the 5-day and 10-day EMAs are beginning to rise in favor of the bulls.
Thus, prospects of a triangle breakout are high.
- A triangle breakout looks likely and if confirmed, would signal a continuation of the rally from the Oct. 15 low of $6,151 and open the doors to $6,800.
- A downside break of the triangle would shift risk in favor of a re-test of the 21-month EMA of $6,123.