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- Bitcoin's ongoing upward trend still looks strong with the 50- and 100-day averages eyeing their first bullish crossover since March 2019.
- The cryptocurrency looks set to test $10,000 over the next few weeks.
- A minor pullback to levels below $9,000 may be seen before a stronger rally as the short-duration charts are suggesting bull fatigue.
Bitcoin printed a three-month high on major exchanges early Monday with key indicator eyeing its first bullish turn in 11 months.
Prices rose to $9,615 on
Luxembourg-based Bitstamp exchange during the Asian trading hours. That was the
highest level since Oct. 28. The top cryptocurrency also hit a three-month high
of $9,628 and $9,615 on Bitfinex and Coinbase, respectively.
Meanwhile, bitcoin’s global average price, as calculated by CoinDesk’s Bitcoin Price Index (BPI), fell $30 short of Friday’s high of $9,633 – the highest level since the end of October.
Notably, the move higher happened as China’s stock market fell 8 percent in early trading – likely due to the coronavirus outbreak and its potential impact on the nation’s economy. The Chinese equity markets were closed last week for the extended New Year holiday.
Futures on the S&P 500, however, remained bid and rose 0.65 percent despite the risk-off mood in the Chinese markets. Traditional safe havens like gold are also facing selling pressure at press time – a sign the broader markets may be done pricing the negative impact of coronavirus on the global economy.
Interestingly, bitcoin’s break above $9,600 was quickly undone with a drop back to $9,250. The cryptocurrency was last seen trading around $9,330, representing a marginal loss on a 24-hour basis.
Despite the pullback from three-month highs, the overall trend remains bullish with the list of technical indicators calling an upside move growing with each passing week.
Soon to join that bandwagon is a bull cross of the 50- and 100-day moving averages (MAs), as seen below.
Daily chart
The 50-day MA is trending north and looks set to cross above the 100-day MA in the next day or two. The resulting bullish crossover would be the first since March 2019.
Bull trap?
MA crossovers are lagging indicators and often trap buyers on the wrong side of the market.
For instance, the 50- and 100-day bull cross observed in June and August 2018 has failed to inspire buyers. However, back then the broader market conditions were bearish – bitcoin topped out at $20,000 in December 2017 and had been charting lower highs ever since.
Such crossovers, however, are widely followed and tend to attract stronger buying pressure when the broader market conditions are looking bullish.
The latest bull cross is accompanied by a bullish higher lows and higher highs setup. Further, key indicators like the weekly MACD histogram and the relative strength index are reporting bullish conditions.
Hence,
BTC may see increased chart-driven buying on the back of the bull cross.
As for the next 24 hours, the odds appear stacked in favor of a drop to $9,000.
4-hour and daily charts
The four-hour chart shows bitcoin has been largely restricted to a narrow range of $9,200-$9,600 since Jan. 29.
A
convincing move above $9,600 would imply a continuation of the rally from the
Jan. 24 low of $8,213 and open the doors to $10,000.
A
downside break would expose the psychological support of $9,000. If that level
is breached, sellers will likely attack the 200-day MA located at $8,874.
The RSI on the four-hour chart is trending south, indicating scope for a range breakdown. Supporting the bear case is the long upper shadow attached to today’s daily candle.
Dips to the 200-day MA, if any, will likely be short-lived, as longer-term indicators are biased bullish.
Disclosure: The author does not currently hold any digital assets.