Bitcoin’s (BTC) 45 percent month-on-month rally has likely put the leading cryptocurrency on the path to long-term success, technical studies indicate.
As of writing, BTC is changing hands at $8,300 on Bitfinex, having clocked a two-month high of $8,507 on Tuesday.
A month ago, it was all gloom and doom in the bitcoin market, perhaps warranted, as the cryptocurrency had created back-to-back long-term bearish chart patterns in the month of May and June. Consequently, BTC looked primed for a move lower to $5,000.
However, the inverse head-and-shoulders breakout seen earlier this month confirmed a short-term bearish-to-bullish trend change. Furthermore, the convincing break above $8,000 seen this week appears to have set the stage for a long-term bull market.
Daily chart: Falling channel breakout
To start with, the pennant breakdown witnessed on June 9 had signaled a revival of the sell-off from the record high of $20,000 reached in December 2017.
However, the ensuing sell-off ran out of steam at $5,755 (June 24 low) and the subsequent recovery established a falling channel (bearish pattern marked by circles), which has been breached to the higher side this week.
So, what we have is an upside break of the four-month-long falling channel, i.e. a long-term bearish-to-bullish trend change.
4-hour chart: Rising channel is intact
The short-term outlook also remains bullish as indicated by the rising channel (higher highs and higher lows). Still, there is merit in being cautious as the above chart also shows a bearish relative strength index (RSI) divergence, which could yield a price pullback.
- BTC has likely witnessed a long-term bullish reversal this week.
- In the short-term, BTC may struggle to find a firm foothold above the all-important 200-day moving average (MA) hurdle of $8,593, courtesy of overbought conditions.
- BTC could revisit the 100-day MA support of $7,616 if the bearish RSI divergence seen in the 4-hour chart pushes prices below $7,938 (rising channel support).
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