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Bitcoin Price Eyes Double Bottom Reversal After $4K Defense
Bitcoin's defense of key long-term support for the second time in four days is a positive sign for a potential recovery rally.
Bitcoin's defense of key long-term support for the second time in four days is a positive sign for a potential recovery rally.
The leading cryptocurrency by market value fell below $4,242 (low of Wednesday's inside-day candle) in the Asian trading hours, putting the bears back into the driver's seat. As a result, BTC fell below the 200-week exponential moving average (EMA) of $4,182 earlier today.
STORY CONTINUES BELOW
The breach of the EMA support, however, may have trapped the bears on the wrong side of the market, as BTC is currently trading at $4,330 on Bitstamp, having clocked an intraday low of $4,061 earlier today.
It is worth noting that the long-term EMA was first breached on Tuesday. The subsequent sell-off, however, ended at the 14-month low of $4,048 and prices recovered to $4,500 on the following day.
The repeated failure to beat the long-term support indicates the bears have likely run out of steam. As a result, a stronger corrective rally could be in the offing.
4-hour chart
On the 4-hour chart, the relative strength index (RSI) has created a bullish divergence with higher lows.
As a result, BTC looks set to test $4,635 – the neckline of the double-bottom bullish reversal pattern. A break above that, if confirmed, would open up upside toward $5,100 (target as per the measured height method).
Daily chart
As seen above, the 14-day relative strength index is holding below 30.00 for the ninth day straight, signaling ongoing oversold conditions.
The 5- and 10-day EMAs, currently at $4,546 and $4,933, respectively, are still trending south. Therefore, corrective rallies above the 10-day EMA, if any, could face exhaustion near $5,000.
View
- Repeated defense of the 200-week EMA likely indicates seller exhaustion. (edited
- A break above $4,635 would confirm a double-bottom breakout on the 4-hour chart and could yield a stronger recovery rally to $5,100.
- A weekly close on Sunday (UTC time) below the 200-week EMA of $4,182 could prove costly, as the next major support is located directly at $3,100 (200-week simple moving average).
Disclosure: The author holds no cryptocurrency assets at the time of writing.
Bitcoin image via CoinDesk archives; charts by Trading View
Omkar Godbole
Omkar Godbole is a Co-Managing Editor on CoinDesk's Markets team based in Mumbai, holds a masters degree in Finance and a Chartered Market Technician (CMT) member. Omkar previously worked at FXStreet, writing research on currency markets and as fundamental analyst at currency and commodities desk at Mumbai-based brokerage houses. Omkar holds small amounts of bitcoin, ether, BitTorrent, tron and dot.
