Yahoo Finance An Old Resistance Hurdle Is Back and Could Stall Bitcoin’s Price Rally
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Bitcoin clocked highs above $4,000 over the weekend and closed last week on a positive note, strengthening the short-term bullish outlook.
The ongoing recovery rally, however, could pause around $4,000 or fall back to key support levels lined up at $3,775 and $3,658, as the bearish (downward sloping) 21-week simple moving average (SMA) is currently lined up at $4,073. That SMA served as a stiff resistance last year.
Bitcoin’s outlook as per the daily chart would turn bearish if prices see a UTC close below the Feb. 27 low of $3,658. That would open the doors for a re-test of lows near $3,300 seen at the end of January.
Bitcoin’s (BTC) four-week price rally now faces a former support-turned-resistance level that repeatedly capped gains in 2018.
The crypto market leader closed (UTC) yesterday at $3,965 on Bitstamp, representing a 1.73 percent gain on a weekly basis, according to Bitstamp data. That was the fourth straight weekly gain and the longest winning streak since April 2018.
With strong volumes backing bitcoin’s move to a three-week high of $4,040 over the weekend, the case for an extension of the ongoing recovery rally from January lows looks strong.
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However, a long-term bearish-to-bullish trend change above $4,236 may remain elusive for few weeks, as the 21-month simple moving average (SMA) â a technical line which acted as strong resistance in 2018 â is currently located at $4,073.
More importantly, the average line is still trending south in favor of the bears, and bitcoin is not likely to breach it with a 90-degree rally.
Further, with BTCÂ struggling to hold on to gains above $4,000 for the third day running, the bullish momentum is beginning to wane.
As of writing, the BTC is changing hands at $3,955 on Bitstamp, having hit a high of $4,016 earlier today.
Weekly chart
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On the weekly chart, bitcoin printed bullish higher lows along the 21-week SMA throughout the 2016-2017 uptrend. The average support was breached on Jan. 29, 2018, and has reversed rallies ever since.
As such, a convincing move above that SMA, currently at $4,073, could be considered an early sign of a long-term bullish reversal.
It is often observed that markets tend to consolidate post-break above a downward sloping MA and pick up a strong bid once the average has shed bearish bias (bottomed out).
For instance, BTC jumped above the descending 100-day MA on Feb. 19, but the follow-through quickly fizzled out near $4,200 and prices fell back to the long-term MA on March 4. More importantly, bitcoin lacked clear directional bias and rose back to $4,000 only after the average turned flat on March 14.
Thus, any break above the 21-week SMA needs to be viewed with caution as long as the average line is trending south. A repeated rejection at the average line could invite selling pressure, as seen in November.
Daily chart
On the daily, BTC closed above $3,950 (Mar. 9 high) on Saturday, bolstering the short-term bullish setup as indicated by both the ascending trendline and the upward sloping 5- and 10-day MAs.
So far, however, the follow-through has been anything but bullish, which adds credence to the possibility of a pause in upward momentum suggested by the weekly chart.
Disclosure: The author holds no cryptocurrency assets at the time of writing.
Bitcoin image via Shutterstock; charts by Trading View
