- Bitcoin’s daily price range has dropped to levels last seen in the weeks leading up to the sell-off witnessed mid-November. The latest bout of consolidation, however, looks more likely to end with a move to the higher side, as the cryptocurrency has created a falling wedge on the daily chart. Further, signs of bearish exhaustion have emerged on the 4-hour chart.
- A strong move above $3,430 would confirm a falling wedge breakout and open the doors to $3,658 (the high of the bearish gravestone doji created on Jan. 26).
- The bullish case would weaken below the recent low of $3,322.
The current calm in the bitcoin (BTC) market is reminiscent of the lackluster trading witnessed in October.
Bitcoin’s daily trading range, the spread between the highest and lowest prices, fell to $33 yesterday – the lowest since Oct. 31, according to CoinMarketCap data. On that date, the leading cryptocurrency had witnessed a daily trading range of $32.
Back then, BTC was squeezed above $6,300 for four weeks leading up to Nov. 14, when the cryptocurrency dashed hopes of a long-term bullish reversal with a convincing break below the crucial support of $6,000.
The latest bout of sideways trading below $3,500 is just seven days old and was preceded by a gradual sell-off from late December highs above $4,200.
The odds of the consolidation ending with an upside move are high, as the cryptocurrency has charted a falling wedge – a bullish reversal pattern – on the daily chart.
As of writing, BTC is trading largely unchanged on the day above $3,420 on Bitstamp.
On the daily chart, BTC is probing the upper edge of the falling wedge, currently at $3,430.
A daily close (UTC) above that level would confirm a wedge breakout and allow a rally to $3,658 – the high of the bearish gravestone doji created on Jan. 26. A violation there would validate the wedge breakout and open up upside toward the psychological hurdle of $4,000.
As seen above, BTC cleared the lower edge of the channel yesterday in favor of the bears.
Even so, the psychological support of $3,400 continues to hold ground, signaling seller exhaustion. Hence, BTC could well make a falling wedge breakout in the next 24 hours.
Disclosure: The author holds no cryptocurrency at the time of writing.