Bitcoin price might be exhibiting the first few signs of a possible reversal as it forms an inverse head and shoulders on the 4-hour time frame. Price is just testing the neckline of the chart pattern, and an upside break could confirm that an uptrend is underway.
The chart pattern spans around $6,000 to $6,500 so the resulting rally could be roughly $500. Price has already busted through the 100 SMA dynamic inflection point as an early signal of bullish pressure and could be aiming for a test of the 200 SMA next.
On the subject of moving averages, the 100 SMA is still below the longer-term 200 SMA so the path of least resistance is to the downside. In other words, there’s still a stronger chance for the downtrend to resume than to reverse. However, the gap could narrow and hint at a bullish crossover if bitcoin price keeps climbing from here.
RSI is also pointing up after making some southbound moves from the overbought zone, signaling that buyers are still putting up a fight. Stochastic is also turning higher without even making it halfway through the oversold area, which means that bulls just won’t let up that easily. However, turning back down from the overbought region could bring more sellers in and push bitcoin back to the lows.
Last week’s developments weren’t too positive for bitcoin and the lack of any other updates led to another round of selling. Then again, there may be a lot of buying pressure defending this long-term floor for bitcoin, so it’s understandable that the slide is stalling right around here.
It would take a strong catalyst or a set of positive updates to sustain any rallies, though, and traders might still need to wait for the SEC ruling on the bitcoin ETF applications which won’t happen until September. With that, it won’t be surprising if further consolidation ensues in the days ahead.