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This Price Resistance Level May Hold Key to Bitcoin Bull Market
If bitcoin breaks above a key moving average, it could be considered a sign a bearish-to-bullish trend change has begun.
Автор Omkar Godbole
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That bitcoin may be closing on a long-term bottom is generally accepted by now.
After all, the leading cryptocurrency by market value has dropped by close to 70 percent over the last 13 months.
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The challenge now is to pick up early signs of a long-term bearish-to-bullish trend change, which may be possible with the help of the 10-week simple moving average (SMA).
Acting as resistance, that moving average proved a tough nut to crack in the eight weeks to Nov. 14 – the day BTC reentered the bear market with a big drop below $6,000.
Further, BTC has charted bearish-lower highs above the 10-week SMA in the last 13 months. Hence, acceptance above that hurdle could be considered a sign that the process of bearish-to-bullish trend change has begun.
As of writing, BTC is trading at $3,630 on Bitstamp, representing a 2.5 percent gain on a 24-hour basis. Meanwhile, the 10-week SMA is located at $3,919.
It is worth noting that a full confirmation of a longer-term bullish reversal would be a convincing break above the former support-turned-resistance of the 21-month exponential moving average (EMA), currently at $5,400.
Weekly chart
As seen above, BTC repeatedly failed to cross the 10-week SMA on a weekly closing basis (Sunday's, as per UTC) before falling below $6,000 on Nov. 14.
Prior to that, BTC did cross the 10-week SMA in the last week of both February and April, the third week of July and in the last week of August. These bullish breakouts, however, were short-lived: BTC fell back below the 10-week SMA in the following two weeks, trapping the bulls on the wrong side of the market (marked by arrows).
Put simply, the cryptocurrency has struggled to breach the 10-week SMA throughout the ongoing bear market.
As a result, only a sustained break above the 10-week SMA (at least four weekly candles above the average) would imply bullish reversal.
The outlook remains bearish as long as prices are trading below the downward sloping 10-week SMA of $3,919.
Daily chart
BTC closed back above $3,566 (Dec. 27 low) yesterday, establishing a sideways channel on the daily chart.
With the weekly chart still biased toward the bears, the lower end of the channel, currently at $3,465, could be breached soon. A channel breakdown, if confirmed, would boost the prospects of a drop to the December low of $3,122.
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- A sustained break above the 10-week SMA could be considered an early sign of long-term bullish reversal, although prospects of a near-term move above that average look bleak.
- A channel breakdown on the daily chart would bolster the bearish setup and allow a test of demand around the December low of $3,122.
Disclosure: The author holds no cryptocurrency assets at the time of writing.
Bitcoin image via Shutterstock; Charts by Trading View
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