Bitcoin’s price took a huge leap on 2 April, 2019 after it jumped from $4,173 to $4,800 in an hour, and from $4,641 to $5,121, in the succeeding price candle. This surge in price caused a buying frenzy, a FOMO that raised the market cap of the cryptospace by billions over the next few days.
However, the lingering question is if this rally will stop and correct, or rest and proceed higher. The technicals indicate that the rally has more to it and will continue to go higher before it corrects itself. Since technicals are up to interpretations, there are two scenarios that are likely to happen. The price will proceed to create higher highs with another breakout or correct the price after its recent surge.
The first scenario is based on the understanding that the pattern formed by the price is a “Rising/Ascending Triangle,” while the second pattern can be interpreted as a “Rising Wedge.” The former is bullish, while the latter is bearish.
The price of Bitcoin has formed an ascending triangle pattern, which is a type of continuation pattern. Ascending triangle patterns are usually formed in uptrends and indicate a bullish bias. The pattern also indicates an accumulation phase. The upper trend line for the ascending triangle shows three reaction points and the lower trend line has three reaction points as well.
Further, the volume has declined since its pump and is perfectly primed for the price to breakout. If the price decides to breakout, it will happen to the upside and the extent of the breakout will be 8-12%, which will push the price to the $5,500 – $5800 range. This range also provides a resistance that was formed in November 2018. According to the technicals, the pattern formed will breakout in the next 48 hours and the price will see a bullish rise.
Additionally, the RSI indicator shows clear resistance at the 51-line, which was already tested. The RSI indicator further confirms the movement of the price to the upside.
The formation of a rising wedge pattern, which is the second interpretation of the pattern formed by the prices, is a bearish reversal pattern. Since the pattern is a rising wedge, the probability of a breakout to the downside is extremely high.
For the second scenario, there is a possibility of the price moving a little higher after the breakout and then correcting itself to the downside. Suggesting a move to the downside is Bitcoin’s weekly chart, which shows that bullish momentum is about to come to an end as indicated by the Stochastic indicator and Stochastic RSI.
Further, the 50-weekly moving average is acting as resistance, further restricting the rise in price. Both of the aforementioned indicators show an oversold position for the price of Bitcoin. The indicators have no more room to rise and the natural course for these indicators is to the downside.
The breakout to the upside, as indicated by scenario 1 seems more likely, as opposed to the bearish rising wedge scenario. However, scenario 1 can be confirmed in the next 48 hours, while the rising wedge pattern still has more room for the price to move.
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