For bitcoin (BTC), the path of least resistance is to the upside, according to technical charts.
At press time, the leading cryptocurrency is changing hands at $6,430 on Bitfinex – up 9 percent from the Aug. 14 low of $5,859.
However, BTC has failed three times in the last 72 hours to hold on to gains above $6,500, with the latest attempt to scale the psychological level failing a couple of minutes before press time. This may force investors to question the sustainability of the recent rally.
But such concerns may be unfounded, as the bullish bias has only strengthened in the last 24 hours, as seen in the technical charts below. As a result, BTC could rise toward $7,000 (psychological resistance) over the weekend.
4-hour chart: Bull breakout confirmed
BTC scaled the channel resistance (top end) earlier today, confirming a bullish breakout, that is, the sell-off from the July 25 high of $8,507 has ended and the bulls have regained control.
A closer look at the chart reveals the top end of the channel was playing a spoilsport since Wednesday. Hence, it seems safe to say the bulls must be feeling emboldened, having crossed a key hurdle.
The cryptocurrency has also found acceptance above the 50-candle moving average (MA) and looks set to test the 100-candle MA, currently located at $6,725.
1-hour chart: Bull flag breakout on the RSI
The relative strength index has witnessed a bull flag breakout – a bullish continuation pattern – which indicates BTC could soon pick up a strong bid and jump to the inverse head-and-shoulders neckline of $6,715.
Acceptance above that level would open the doors to $7,500 (target as per the measured height method).
Daily chart: Short-term MAs are beginning to adopt a bullish bias
The 5-day MA is beginning to rise in a bull-friendly manner and has almost crossed the 10-day MA from below (bullish crossover). This change of direction by the 5-day and 10-day MA points to a short-term bullish setup.
- BTC remains on the hunt of the inverse head-and-shoulders neckline resistance of $6,715. A bullish breakout, if confirmed, would validate the bearish-to-bullish trend change suggested by the 4-hour chart and allow a sustained move above $7,000.
- On the downside, a break below $6,213 (low of the right shoulder of the inverse head-and-shoulders pattern) would abort the bullish view.
Disclosure: The author holds no cryptocurrency assets at the time of writing.