It seems like there is no end in sight for Bitcoin’s latest rally. During the weekend, the price oscillated between the $1500 and $1600 levels as the bulls and the bears made their presence known. However, it seems that the bulls have taken the lead as the price broke out and touched $1642 on Bitstamp, ultimately setting brand new all time highs on all exchanges.
Update: Bitcoin’s price just broke the $1642 ATH and is currently at $1654. The market is inching closer and closer to the Fib retracement resistance of $1700.
Just a few hours earlier before the breakout, The Merkle wrote a Bitcoin analysis article titled Bitcoin Price Calm Before The Storm? The article mentioned how due to the exceptionally high volume and relatively low volatility it is evident that a breakout was bound to happen sooner or later.
In a matter of hours, the price jumped over 5% from $1573 to $1642, hinting the market is approaching the $1700 resistance line and might test it very soon. Currently, the obvious battle is surpassing the $1600 resistance which was already tested three times earlier during the weekend. If the market can turn that area into a support zone, then more positive price action isn’t unlikely.
Looking at the hourly chart we can see a clear inverse head and shoulders pattern:
Chart: Bitcoinwisdom
An inverse h&s pattern also called the head and shoulders bottom, is a pattern used to predict the reversal of a downtrend. According to investopedia:
“Investors typically enter into a long position when the price rises above the resistance of the neckline. The first and third trough are considered shoulders, and the second peak forms the head.”
Usually an inverse h&s signals trend reversal from a declining market. While its true that Bitcoin wasn’t on a downtrend prior to the breakout, it goes to show that despite Bitcoin’s two month rally traders are still extremely bullish.
While many signs do point to a continuing positive trend, the bears are not out of the picture just yet. Take a look at Bitcoin’s RSI:
Chart: Bitcoincharts
Currently the Relative Strength Index is at a whopping 86.74 out of a possible 100. An RSI above 70 means the market is overbought. According to investopedia, an overbought market is “a technical condition that occurs when prices are considered too high and susceptible to a decline.”
Using these indicators if you were able to get in on the price hike before the the beginning of May when the RSI was low, then its worth holding on to your stash and seeing if the breakout will continue. On the other hand, if you are looking to buy into the market right now, it should be treated as a high risk investment.
Dislaimer: This is not trading advice, this article is for educational purposes only. If you liked this article, follow us on Twitter @themerklenews and make sure to subscribe to our newsletter to receive the latest bitcoin, cryptocurrency, and technology news.
