The $BTC price surged out of a descending channel on Wednesday and hit $119,500 before pulling back slightly. With short-term indicators signalling an overbought condition, this would be a good time for a short pull-back and retest of the breakout. A major rally could then take place.
$BTC breaks out of descending channel
Source: TradingView
As can be seen on the above 8-hour chart, the $BTC price has been traversing within a descending channel, from which it broke out on Wednesday. Descending channels are bullish formations so it would be expected that the price will carry on up to the all-time high and beyond. A measured move of the channel breakout would take the price to around $130,000.
Nevertheless, when a breakout occurs from such a pattern, technical analysis tells us that the price will usually return to the breakout zone in order to test and confirm it before rising again. In the chart above it can be observed that a small red candle has formed, which might be the first sign that a corrective impulse is inbound.
All the shorter term time frame Stochastic RSI indicators, up to the 12-hour, are at their tops, and so a period of consolidation would be healthy here in order to allow them to reset to a lower level.
The Relative Strength Index (RSI) at the bottom of the chart has its indicator line just inside overbought territory so it would also be good for this to come back down somewhat.
Given the slightly overextended nature of this current move, it may well be that the price could even reenter the channel. If it does so, the $113,000 horizontal support level could potentially be a good base for a bounce. As long as the bulls prevent the price going below $109,000 and making a lower low, a rally to new all-time highs is still the more likely scenario.
Death cross confirmed in daily time frame
Source: TradingView
In the daily chart it can be seen that the death cross (50-day SMA crossing below the 100-day SMA) has now taken place. However, with the price action holding support at the 50-day SMA and well above it, a cross-back may not be too far off.
The Stochastic RSI indicators in the daily time frame are still signalling upside momentum but this may not be for too much longer. At the bottom of the ch
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Author: Laurie Dunn
