Bitcoin (BTC) could be in for a stronger recovery rally ahead of New Year as the recent major sell-off looks to be fading.
The leading cryptocurrency by market value had been trading near $3,200 early yesterday, representing an 83 per cent drop from the record high of $20,000 reached the same date in 2017.However, BTC, which has been ignoring extreme oversold conditions for weeks and struggling to pick up a bid, suddenly jumped to an eight-day high of $3,590 on 17th December.
With the bounce, BTC has not only validated theoversold readings on the 14-week RSIbut also established a bullish reversal pattern on the widely followed three-day chart.
The very next day Cryptocurrency markets continue a fresh rally with Bitcoin (BTC) touching $3,912 and leading altcoins to claw back their latest losses.
As of writing, the cryptocurrency is changing hands at $3788 on Binance.
Ethereum also rallied from $85 to $107 earlier today.
Bitcoin- Technical Analysis
Bitcoin’s (BTC) price crossed key resistance yesterday, boosting the prospects of a stronger rally above $4,000.
BTC broke out of a bearish descending pattern and closed above key resistance at $3,633. That came after picking up a strong bid on the anniversary of its 2017 all-time price high on Monday.
So, with the short-term picture looking bullish, the focus shifts to the next major resistance levels lined up at $4,000 (psychological hurdle) and $4,410 (Nov. 29 high).
The cryptocurrency has recovered 20 per cent from the recent low of $3,122 but is still down 73 per cent on a year-to-date basis.
BTC’s close above $3,633 on the daily chart bolstered the increasingly bullish technical setup, as represented by the positive divergence of the 14-day relative strength index (RSI) and the high-volume falling wedge breakout.
Further evidence that the bears have weakened is a bullish crossover between the 5- and 10-day exponential moving averages (EMAs).
On the hourly chart, the bull flag breakout confirmed yesterday created room for a rally to $3,840 (pole height added to breakout price).
Both the rising trendline and the stacking order of the simple moving averages (SMAs) also favor an extension of the ongoing rally.
The outlook as per the monthly chart would turn bullish if and when prices beat the former support-turned-resistance of the 21-month EMA, currently at $5,728.
In a Nutshell
- Tuesday’s close above $3,633 confirmed a short-term bearish-to-bullish trend change.
- BTC will likely test the psychological level of $4,000 in the next 48 hours, with the next target being resistance at $4,410 (Nov. 29 high).
- A daily close below $3,633 would weaken the bullish scenario but is looking unlikely in the short-term