Bitcoin is still completing its inverse head and shoulders reversal pattern and is now testing the neckline. A break past the $6,600 level could be enough confirmation that an uptrend is in the cards.
The 100 SMA is below the longer-term 200 SMA so the path of least resistance is still to the downside. In other words, there’s a stronger chance for the selloff to resume than to reverse. Then again, the 100 SMA is already holding as dynamic support so there may be some bullish pressure coming back in play.
RSI was heading down to signal bearish pressure but appears to have changed its mind halfway down. This suggests that buyers are putting up a fight and could be strong enough to push for an upside break. The chart pattern is around $800 tall so the resulting rally could be of the same size.
Stochastic has also turned higher without reaching oversold levels, also an indication that buyers might be returning earlier and stronger than expected. The 200 SMA around the $7,200 mark could also be an upside target.
Bitcoin had a rough ride for most of the previous week but bulls have been staunchly defending the long-term floor around $5,800 to $6,000. This suggests that the floor might not break anytime soon and that buyers could make another attempt to sustain a rally.
The improvement in sentiment on account of the promise of central bank action in Turkey, as well as the upcoming trade talks between the US and China, also lifted demand for higher-yielding and riskier assets like cryptocurrencies towards the latter part of the week.
This week, the spotlight could still remain on geopolitical risks, although the FOMC minutes might also lead to some dollar volatility. There have been a number of positive developments in other digital assets like Ripple last week, also helping improve overall sentiment in the industry then.
Images courtesy of TradingView.