Yahoo Finance Trapped Below $7K: Is Bitcoin Prepping for a Big Breakout?
Bitcoin (BTC) has spent a better part of the last 24 hours trading a tight range around $6,800.
In fact, the cryptocurrency has been restricted to an increasingly narrow price range for almost a week now, with neither the bulls nor the bears able to force a big move in either direction. As of writing, BTC is changing hands at $6,840 on Bitfinex.
However, while the sideways trading is somewhat dull for observers and traders alike, the market may be about to become more exciting.
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According to technical theory, the wider the range and the longer the duration of the consolidation zone, the more violent the breakout tends to be.
1-hour chart
The above chart shows, the narrowing price range (represented by the triangle formation) is almost a week old.
The range high is $7,510 and the range low is $6,425. So, bitcoin could see at least a $1,000 dollar move on either side, depending on nature (bullish/bearish) of the breakout.
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As of writing, the triangle support is seen around $6,570, while the resistance is lined up at $7,080.
A downside break could mean the potential for a sell-off to $5,500. On the way lower, BTC may find support around the November low of $6,000, as the daily relative strength index (RSI) will likely show oversold conditions by then.
Also note that BTC has created a bear flag (continuation pattern), inside the narrowing price range. A downside break of the flag would signal a continuation of the sell-off from the April 9 high of $7,189 and would open the doors to $6,150 (target as per the measured height method: pole height subtracted from breakdown price).
However, only a convincing break below $6,570 (triangle support, sloping upwards) would revive the bearish view. That said, the bearish flag breakdown could boost the odds of a drop below that level.
On the bull side, an upside break of the triangle may not necessarily bring a $1,000 rally as resistance is lined up at $7,189 - a strong resistance point established by the high volume sell-off. Thus, the bulls need a clear break above $7,189.
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A potential bear flag breakdown could be considered as a warning the bitcoin is set to move below triangle support seen at $6,570. Acceptance below that level could prompt a drop to $6,000.
If the bulls take charge, a high volume move above $7,189 will likely set the tone for a break above $7,510 (range high) and a rally to $8,100.
Shattered glass image via Shutterstock
