- Bitcoin’s bull revival, as signaled by the weekly chart indicators, is still in the nascent stage and will likely become more entrenched if and when prices clear the resistance levels at $4,190, $4,236 and $4,388.
- A high volume break above the three resistance levels could be followed by a rally to highs above $5,000.
- Bitcoin could challenge resistance at $4,190 in the next few days, as a strong bounce from the ascending 5-week moving average (MA) seen earlier this week has restored the short-term bullish view signaled by a bullish candlestick pattern created on Feb. 27.
- The short-term bullish case would weaken if prices find acceptance below $3,658 (Feb. 27 low).
Bitcoin still needs to beat several key resistance levels to confirm a longer-term bull reversal.
The leading cryptocurrency is currently trading at $3,840 on Bitstamp, having hit a high of $4,190 last week. At that level, BTC was up 34 percent from the lows near $3,100 seen in December.
With the recovery rally, a number of longer-term bitcoin price indicators like the moving average convergence divergence and the money flow index are flashing early signs of bull revival.
The trend change, however, would gain credence if and when prices establish the most basic of all bullish technical patterns – a higher low and a higher high.
BTC has carved out a higher low near $3,300 in the last two months and a higher high would be confirmed above $4,236 – a bearish lower high created on Dec. 24.
So, the focus is on $4,236 and two more resistance levels – $4,190 and $4,388 – which, if breached, will generate strong bullish cues.
Let us now explore all three levels in detail.
Resistance 1: $4,190
BTC created an inverted bullish hammer candle with a high of $4,190 during the week ended Feb. 24.
That candlestick pattern occurs when the bulls test bears’ resolve to keep prices lower and is widely considered an early warning of potential bullish reversal if it appears after a prolonged sell-off, as is the case with BTC.
A bullish trend change, however, would be confirmed once prices cross $4,190.
Resistance 2: $4,236
As noted earlier, a longer-term bull revival would be confirmed if prices violate the bearish lower high of $4,236 created on the Christmas day.
It is worth noting that a break above $4,236 would also confirm an inverse head-and-shoulders breakout, which essentially represents a successful transition from the bearish lower high-lower low pattern to the bullish higher low-higher high pattern.
The breakout would open the doors to $5,100 (target as per the measured move method).
Resistance 3: $4,388
The cryptocurrency is still trapped in a bearish channel. The upper edge of the falling channel is currently located at $4,388. Notably, the downward sloping 50-candle MA is also located there.
A 3-day close above $4,388 would confirm twin bullish cues: a falling channel breakout implying a long-term bullish reversal and an upside break of the bearish moving average resistance. That would further raise the odds of a rally towards $5,000.
It is worth noting the probability of BTC breaching the second resistance would rise once the first resistance is scaled.
Will BTC rise to $4,190?
Bitcoin’s strong bounce from the 100-week moving average witnessed earlier this week restored the short-term bullish view put forward by the “long-tailed” doji candle created on Feb. 27.
Further, the 5- and 10-week MAs have produced a bullish crossover for the first time since August 2018. So, a re-test of January high of $4,190 could be on the cards.
That bullish case, however, would weaken if prices find acceptance below $3,658 (Feb. 27 low).
Disclosure: The author holds no cryptocurrency assets at the time of writing.