Against all odds, bitcoin (BTC) defended the support at $6,000 over the weekend, opening doors for a stronger corrective rally above $6,480.
Friday’s drop below $6,240 (bear flag breakdown) had opened the doors to the re-test of the June low of $5,755. Further, BTC closed below Thursday’s low of $6,183 on Friday, signaling a continuation of the sell-off from the July 25 high of $8,507.
Clearly, the odds were stacked in favor of the bears, still, a break below $6,000 did not materialize. The leading cryptocurrency printed a six-week low of $6,008 on Saturday, before rising to $6,500, where it currently sits.
The corrective rally could be extended further towards $6,850 if the bulls overcome a firm resistance at $6,480, as seen in the chart below.
As seen in the chart above, BTC is currently working hard to scale the trendline hurdle of $6,480.
A convincing break above the key resistance would validate the bear-to-bull trend change signaled by the bullish relative strength index (RSI) divergence over the weekend and would allow a stronger rally toward $6,850.
However, it is going to be a tough task as the downward sloping (bearish) 50-candle moving average (MA) is currently located at $6,580. Further, the 100-candle MA is set to cross the 200-candle MA from above in favor of the bears.
As a result, a repeated failure to take out trendline resistance could shift focus back to bearish MAs and weaken the bull case.
BTC created an inverse head-and-shoulders-like pattern on the hourly chart over the weekend and cleared the neckline hurdle earlier today, adding credence to the bullish RSI divergence seen in the 4-hour chart.
The bullish breakout has opened up upside toward $6,850 (target as per the measured height method).
- BTC will likely find acceptance above the falling trendline hurdle of $6,480 and extend the corrective rally from the six-week low of $6,000 to $6,850 in a day or two.
- Bull failure to take out the falling trendline resistance in the next few hours could prove costly and yield a re-test of $6,162 (support as per the hourly chart). A violation there would expose $6,000 (February low).
- Acceptance below $6,000 would revive the bearish view and shift risk in favor of a drop to $5,755 (June lows).
Disclosure: The author holds no cryptocurrency assets at the time of writing.
Bitcoin image via Shutterstock; Charts by Trading View
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