Can Bitcoin bulls build on the three-week recovery?
Bitcoin has been trading mostly sideways since February as you can see in the weekly chart below. This shows the steep decline from December 2017 to the crash low of $5920 in mid-February.
The cryptocurrency has seen narrowing ranges and decreasing volatility as the retail speculators slowly exit the market. However, each bounce has seen lower highs so there clearly are sellers out there taking advantage of any strength. The bounce in February peaked at $11,780. The next bounce in May peaked a fraction below $10,000 and in July we peaked at $8500, just after we hit a crash low of $5780/5774 at the end of June.
The dip that followed the July peak, however, managed to bottom about $100 above the crash low of $5780/5774. This is the first positive signal in the bear trend.
Bitcoin has staged a good recovery over the past three weeks. If we zoom into the daily chart below we see prices stablising above the blue 100-day and green 500-day moving averages, converging at $6850/900. This is the second positive signal in the bear trend.
Bulls are now being held back by the rising two-month trendline you see from late June. Yesterday’s red candle highlights this resistance barrier in overbought conditions. Failure here therefore risks a slide to the moving average support zone at $6900/6850. Bulls must defend this area successfully to build on the three-week recovery.
Long positions here need stops below $6700. If bulls cannot hold prices above this level they have blown their chance of gaining control of this market once again.
Clearly the bulls need to push the market above the trendline at $7300/7350. However, there is another big challenge just above. You can see the four-month downward-sloping trendline from the beginning of May which met the red 200-day moving average at the beginning of August. Today they are hovering around $7700/7800 and should act as strong resistance on a break higher.
If bulls can force prices through this resistance they can tackle the less important July high at $8490/8500.
Technical Analyst & Trader
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