Bitcoin (BTC) is again trading in a narrowing price range above $6,400, but the lateral trading may soon give way to a rally, according to technical studies.
However, so far, a bullish follow-through has not materialized, possibly because buyers are waiting for a more credible evidence of bearish invalidation.
Also standing in the way of a potential rally are a number of major key resistance levels, as discussed yesterday.For instance, BTC is yet to find acceptance above the 50-day exponential moving average (EMA) hurdle, currently lined up at $6,537. Further, BTC failed to close (as per UTC) above the trendline connecting the Sept. 28 high and Oct. 8 high on Monday and is currently trading well below that diagonal line.
Should BTC clear these key obstacles, then the traders may feel convinced that the cryptocurrency has bottomed out again at the 21-month EMA support and could push prices higher toward long-term falling trendline resistance above $7,000.
The above scenario could play out if the three-day long narrowing price range (triangle pattern) is breached on the higher side. Interestingly, the momentum studies – moving averages – on the short duration charts are aligned for a break above the triangle resistance.
At press time, BTC is trading largely unchanged on the day at $6,440 on Bitfinex.
The 50-hour, 100-hour and 200-hour exponential moving averages (EMAs) are trending north, indicating a bullish setup. Further, the stacking order of the 50-hour EMA above the 100-hour EMA, above the 200-hour EMA is a classic bullish signal.
As a result, BTC is more likely to cut through the upper edge of the triangle, currently seen at $6,460.
The choppiness index has dipped below the 38.2 percent level, which means the cryptocurrency is more inclined towards a directional trend. So, it seems safe to say that triangle breakout, if confirmed, could yield a sharp move, higher possibly toward $6,800.
Over on the daily chart, BTC has cleared the trendline falling from July highs and the 5-day and 10-day EMAs are beginning to rise in favor of the bulls.
Thus, prospects of a triangle breakout are high.
- A triangle breakout looks likely and if confirmed, would signal a continuation of the rally from the Oct. 15 low of $6,151 and open the doors to $6,800.
- A downside break of the triangle would shift risk in favor of a re-test of the 21-month EMA of $6,123.
Disclosure: The author holds no cryptocurrency assets at the time of writing.