bitcoin price has seen a notable rise of over 4% in the last 12 hours, marking a departure from the recent lull. This move follows a breakout of the bullish pennant, with bitcoin price now targeting the $55,000 mark.
The 4-hour chart below (btc/USD) shows bitcoin trading at $44,609, having broken through the boundaries of a bullish pennant pattern, a bullish continuation signal frequently followed by an upward price trajectory.
What this means for the price of bitcoin
The pennant, which is characterized by converging trend lines after a substantial price movement, signifies a pause in trading before the market resumes its previous uptrend. The breakout of the pennant suggests a continuation of the uptrend with a potential target that is often extrapolated from the duration of the previous move, known as the flagpole, that initiated the formation of the pennant.
As for moving averages, bitcoin has displayed a golden cross pattern, with the 20-period EMA (currently at $43,389) rising above the 50-period EMA (currently at $43,049) and the 100-period EMA (currently at $42,727). This crossover supports the bullish sentiment in the market.
Volume, a key indicator of the strength behind price movements, also showed a rebound when the breakout occurred, further validating the bullish scenario.
The Fibonacci retracement tool, applied from the high of $49,092 to the low of $38,484, shows bitcoin price breaking above the 0.5 retracement level ($43,788). The next critical levels to watch are the 0.618 ($45,040) and 0.786 ($46,822) Fibonacci levels, which can serve as resistances in the short term.
Beyond that, the full 1.0 ($49,092) extension is on the horizon, with the 1.618 ($55,648) extension closely aligning with the $55,000 target, reinforcing its importance as a potential price target.
The RSI, at 73.47, indicates strong buying pressure but also suggests caution as the market approaches overbought conditions. However, it is important to note that the price of bitcoin in its strongest moments tends to reach very high levels, showing massive momentum. Therefore, it is essential for traders to keep an eye out for any potential divergence that may indicate a weakening of the current momentum.
In conclusion, bitcoin's breakout above the bullish pennant pattern has set the stage for a possible rally towards the $55,000 mark. The intersection of the golden cross, increasing volume and Fibonacci extension levels add credibility to the bullish outlook.
However, traders should remain alert for overbought conditions that could prompt a retest of key support levels. The most crucial support lies at the 0.5 Fibonacci level ($43,788), with additional support levels at 0.382 ($42,536) and 0.236 ($40,988). A sustained move below these levels could challenge the bullish thesis and shift focus towards the next significant support at $38,484.
Featured image created with DALL·E, chart from TradingView.com
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