Bitcoin could be done with its downtrend as it forms a classic reversal pattern on its 1-hour time frame. Price is completing the right side of its inverse head and shoulders pattern and is about to test the neckline around $6,600.
A break past this resistance could lead to a rally of around $800 or the same height as the chart formation. The 100 SMA has just crossed above the longer-term 200 SMA to signal that the path of least resistance is to the upside. In other words, there’s a strong chance for the uptrend to gain traction from here.
RSI is also on the move up so Bitcoin could follow suit. Stochastic is also heading higher to indicate that bullish pressure is in play. However, both oscillators are nearing overbought levels to indicate that buyers are getting exhausted and sellers could return. In that case, Bitcoin could still dip to the area of interest around $6,200 – which is also near the dynamic support at the moving averages.
The recent bounce is being attributed to a short squeeze from the earlier declines, but it’s worth noting how buyers continue to defend the long-term support around $5,800 to $6,000. Apart from that, there was also a pickup in risk-taking recently, likely spurred by the upcoming trade talks between the U.S. and China.
This could remove a lot of uncertainty for investors, which then encourages them to put funds back into riskier assets like cryptocurrencies. Also, a number of analysts have pointed to the typical rally in Bitcoin after futures expiry days.
Looking ahead, traders could continue to take cues from overall market sentiment in determining where to take Bitcoin next. There are no major catalysts scheduled from the US economy, so headlines relating to trade or Turkey could influence risk appetite.
Images courtesy of TradingView.