Bitcoin has climbed enough to reach the top of its falling wedge pattern visible on the daily time frame. Sellers might be ready to return at this area as a bearish divergence can be seen.
In particular, stochastic has made higher highs while price had lower highs since mid-July. The oscillator has yet to turn lower from the overbought zone to signal a return in selling pressure. Once it does, Bitcoin could still resume the drop to the wedge bottom near $6,000.
In addition, the 100 SMA is below the longer-term 200 SMA to confirm that the path of least resistance is to the downside. In other words, it’s more likely for the selloff to resume than to reverse. To top it off, the 200 SMA lines up with the wedge resistance around the $8,000 major psychological mark to add to its strength as a ceiling.
RSI is on the move up but is also approaching overbought levels. This means that buyers are starting to feel exhausted and may book profits soon while letting sellers take over.
Still, strong bullish momentum might lead to an upside break and a corresponding rally that’s the same height as the chart pattern. This would also complete a double bottom, which is a classic reversal formation.
A sustained move past the $8,500 area could add confirmation that a longer-term climb is underway, fueling the narrative that a major rebound is in the cards before the year comes to a close. This is also being supported by bullish forecasts from Satis ICO research advisory group, which predicts Bitcoin can hit $33,000 by next year.
Bulls eager to be part of this move could keep piling on positions, but traders remain wary of the pending SEC ruling on Bitcoin ETF applications. Note that a handful are waiting for the regulator’s decision, which is due at the end of this month.
Images courtesy of TradingView.