Bitcoin (BTC) scaled the crucial 50-day moving average (MA) on Monday for the first time in nearly two months, however, that does not amount to a bull breakout, technical charts indicate.
The corrective rally picked up a pace 24 hours ago, possibly due to reports stating that BlackRock, INC–the world’s largest asset manager and exchange–traded fund (ETF) provider, is considering venturing into cryptocurrency markets. Later in the day, BlackRock CEO Larry Fink clarified rumors by stating that there isn’t a huge demand for cryptocurrencies.
Still, BTC remained bid and closed (as per UTC) above the 20-day MA for the first time since May 20, validating the argument that a short-term bottom has been made at $5,755 (June 24 low).
While a move above the 50-day MA is encouraging, it does not qualify as a bullish reversal. Only a convincing break above the inverse head-and-shoulders neckline of $6,838 would confirm a short-term bearish-to-bullish trend change.
At press time, the leading cryptocurrency is changing hands at $6,720 on Bitfinex – up 5 percent in the last 24 hours and the 50-day MA is located at $6,720.
BTC’s rally from the two-week low of $6,080 (hit on Thursday) to $6,771 (today’s high) has established a higher low (bullish pattern) on the daily chart.
Further, the relative strength index (RSI) has moved above 50.00 (in bullish territory) and the short-term moving averages (5, 10) are beginning to rise in favor of the bulls.
So, the cryptocurrency looks set to test $6,838 (inverse head-and-shoulders neckline hurdle), albeit after a minor intraday pullback as the short-duration charts are flashing overbought conditions.
The RSI is stationed well above 70.00, indicating the rally from $6,080 is overdone. So, prices could revisit 10-candle MA support of $6,580 in the next few hours.
- BTC looks set to test $6,838 (inverse head-and-shoulders neckline), albeit after a minor pullback as the cryptocurrency is looking overbought as per intraday technical studies.
- A close (as per UTC) above $6,838 would confirm a short-term bearish-to-bullish trend change and would open up upside towards $7,920 (target as per the measured height method). That said, bulls would still need to observe caution as the area between $7,000-$7,100 is packed with stiff resistance lines.
- On the downside, a close below 20-day MA of $6,448 would weaken the odds of an inverse head-and-shoulders breakout.
Disclosure: The author holds no cryptocurrency assets at the time of writing.