Bitcoin (BTC) is working its way through the key supply zone above $7,500 and could test resistance at $7,870 in the next 24 hours, the technical charts indicate.
The cryptocurrency looked primed for a corrective rally yesterday, having created a bullish outside-day candle on Tuesday. However, the bulls had a tough time absorbing supply around 50-candle moving average (MA) on the 4-hour chart, located yesterday at $7,550.
The repeated failure to beat the moving average hurdle ended in a downside break of the diamond pattern. The subsequent sell-off ran out of steam at $7,270, and led to a convincing move above the 50-candle MA, seen today at $7,441.
As of writing, BTC is changing hands at $7,535 on Bitfinex, up 0.6 percent over 24 hours, and looks set to test the falling trendline resistance located at $7,870.
4-hour chart
The recovery from $7,270 to $7,570 has established a higher low (bullish pattern), which adds credence to Tuesday’s bullish outside-day candle and bullish price-relative strength index (RSI) divergence.
Hence, BTC could test supply around $7,870 – resistance of trendline sloping downwards from the May 6 high and May 21 high.
It also means the cryptocurrency will likely peep above the all-important 50-week MA, currently located at $7,711. However, only a weekly close (Sunday’s close as per UTC) above that level would signal bearish invalidation.
Weekly chart
As seen in the chart above, the last weekly candle had closed below the 50-week MA for the first time since October 2015, in theory indicating the end of the long-term bull run.
Despite the bullish set up, there is merit in being cautious as the major moving averages – 50, 100 and 200 – on the 4-hour chart are also biased to the bears, as is the 10-day MA.
View
- Bitcoin will likely soon rise to $7,870 (descending trendline hurdle) in the next 24 hours. A high-volume break above that level would allow a re-test of the 50-day moving average, currently located at $8,522.
- Bearish scenario: The moving averages are maintaining a bearish bias, so a drop to $6,900 could be on the cards if the bulls fail to capitalize on the break above $7,500 and the price drops below $7,270 in the next 24 hours.
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