Bitcoin managed to bust through the top of its descending channel on the 1-hour chart to signal that a reversal from the earlier slide is due. Price also closed past the 100 SMA dynamic inflection point to confirm that bullish momentum is picking up.
However, the 100 SMA is still below the longer-term 200 SMA to indicate that the path of least resistance is to the downside. In other words, the downtrend is more likely to resume than to reverse. RSI is also in the overbought zone to signal exhaustion among buyers and turning lower would mean a return in selling pressure. Similarly, stochastic is indicating overbought conditions and moving down could indicate that bears are back.
Still, the gap between the moving averages is narrowing to indicate that bearish momentum is slowing. A test of the 200 SMA dynamic inflection point could prove to be a make-or-break level as this lines up with the neckline of a double bottom, which is a classic reversal signal.
Confirmation on a break above the $4,200 mark could send Bitcoin climbing by the same height as the chart formation. This spans around $3,700 to $4,200, so a rally that’s at least $500 might ensue.
The recent rally is being pinned on improved outlook when it comes to institutional investments. Note that this is widely expected to usher in a big rebound early next year as more platforms could make it easier for banks and funds to put more money in the industry. However, doubts that institutions might invest in the industry kicked in when the bear market took place.
Also, Bloomberg reported that Nasdaq will push through with its Bitcoin futures offering, thereby granting easier access to Bitcoin for more market participants. This could also push up volume and activity, likely keeping prices supported. These catalysts appear to have been enough to create a bottom in the slide but traders might need a bit more to sustain the climb.
Images courtesy of TradingView.