- Bitcoin’s quick recovery from levels below the former resistance-turned-support of $5,627 (April 23 high) seen on Monday, coupled with a break above the stiff resistance at $5,780 (June 2018 bottom) seen today, indicate fairly strong bullish sentiment.
- BTC looks set to breach the psychological hurdle of $6,000, as suggested by April’s bullish close, and may rise to $6,200 in the next few days. The bullish case is backed by a diamond breakout on the 4-hour chart.
- Bulls still need to observe caution, as the 3-day chart shows a bearish divergence of trading volumes. A case for a deeper pullback to $5,000 would strengthen if the price falls below $5,686 (daily opening price) in the next 24 hours.
Bitcoin (BTC) continues to gain altitude in line with the recent bullish developments on the technical charts and could soon rise above the psychological resistance of $6,000.
The leading cryptocurrency by market capitalization crossed key resistance at $5,780 earlier today to print a high of $5,970 on Bitstamp – a level last seen on Nov. 14.
Bullish sentiment is evidently strong, as evidenced by bitcoin’s quick recovery from the break below the former resistance-turned-support of $5,627 (April 23 high) on Monday.
As a result, the cryptocurrency looks set to break above $6,000, as suggested by April’s bullish closeabove the crucial 21-month exponential moving average (EMA).
As of writing, BTC is changing hands at $5,920 on Bitstamp, representing a 43 percent rise from the low of $4,120 seen on April 2.
The rally, confirming a long-term bearish-to-bullish trend change in the weeks, comes in the lead up to Blockchain Week NYC and CoinDesk’s Consensus 2019 event, which is set to take place May 13–15 at the New York Hilton Midtown.
The cryptocurrency may remain better bid post the event, as seen in some years previously.
Back in 2017, BTC rose from $1,233 to $1,207 following the conclusion of Consensus on May 24. Further, prices also rallied 21 percent and 3 percent in one month following the blockchain week in September 2015 and May 2016, respectively.
In last year’s bear market, however, prices dropped from $8,700 to $5,780 in five weeks following the blockchain and crypto gathering in mid-May, indicating that broader market sentiment is the greater driving factor.
Daily and 4-hour charts
BTC is trading well above the crucial resistance of $5,780 (June 2018 low) on the daily chart (above left). It’s worth noting that the cryptocurrency has failed three times in the last four trading days to secure a UTC close above that level.
The focus, therefore, is on the UTC close. The case for a sustained rise to $6,200 and above would strengthen if the price closes today above $5,780.
However, a pullback to $5,000 could be seen in the short-term if we see a UTC close below $5,686 (daily opening price), leaving a candle with a long upper shadow in its wake – an early sign of bearish reversal.
A bullish close looks the more likely if we take into account a diamond breakout seen in the 4-hour chart (above right), indicating the rally from the April 25 low of $4,991 has resumed and the next major resistance band of $6,100–$6,200 could soon come into play.
That said, a move above $6,000 could be short-lived or remain elusive, with the long duration chart below questioning the sustainability of the recent gains.
On the 3-day chart, volume bars have consistently printed lower highs, contradicting the higher lows and higher highs on price.
Further, trading volume (red arrows) on red candles (drop in prices) has been bigger than the volume on green candles (uptick in the price), which could be considered a sign of weakening buying pressure.
Validating that argument is the bearish divergence of the Chaikin money flow index, which is yet to challenge the high of 0.231 seen on April 2, despite prices being at near 6-month highs.
The Chaikin money flow index measures the money flow volume over a set period of time (usually 21 days) to gauge buying and selling pressure.
Disclosure: The author holds no cryptocurrency assets at the time of writing.