Canada Markets closed

Bitcoin Eyes Test of Key Price Hurdle in First Since November

Omkar Godbole

Bitcoin (BTC) could test a key resistance line for the first time in nearly two months.

The widely followed 50-day simple moving average (SMA) line is currently located at $3,940 – $100 above bitcoin’s current price of $3,840 – according to Bitstamp data.

The crucial SMA line was last put to test on Nov. 8. Back then, the SMA was located at $6,450 and was serving as a stiff resistance.

How to Last the Crypto Winter? Seek Simplicity, Manage Complexity

On Nov. 14, BTC nosedived below $6,000, putting the bears back into the driver’s seat.  As a result, the gap between the 50-day SMA line and price widened sharply in the following two weeks. Notably, on Nov. 25, the 50-day MA line was located at least $2500 above price.

That spread, however, has narrowed sharply in the last two weeks, indicating waning bearish pressures. Further, price chart analysis indicates that the bulls have won control, at least for the short-term.

BTC, therefore, could test and possibly break above the 50-day SMA line of $3,940 in the next day or two.

Daily chart

Bitcoin Price Suffers Worst Monthly Losing Streak in 7 Years

As seen above, BTC ran into offers near the 50-day SMA earlier today. Notably, at 00:05 UTC, BTC was trading $40 short of the 50-day SMA.

Despite the pullback from intraday highs near $3,900, the outlook remains bullish, as the positive divergence of the relative strength index (RSI), confirmed on Dec. 18, is still valid.

Further, 5- and 10-day exponential moving averages (EMAs) are beginning to curl upwards. The RSI is also biased bullish above 50.00.

The 50-day SMA is indeed trending south, indicating a bearish setup. The long-term averages, however, are lagging indicators. As a result, the price action always supersedes the long-term moving average lines.

It is worth noting that a break above the 50-day SMA, if confirmed, would open the doors to $4,170 – neckline of the inverse head-and-shoulders pattern. The 50-day exponential moving average (EMA) is also located just below the neckline hurdle. So, $4,170 is the level to beat for the bulls.

6-hour chart

The triangle breakout seen in the 6-hour chart indicates that the rally from the December low of $3,122 has resumed.

The RSI is printing bullish levels above 50.00. Meanwhile, the stacking order of the 50-candle MA above the 100-candle MA is also a classic bull indicator.

View

  • BTC could rise above the 50-day SMA of $3,940 and extend the rally to $3,170 in the short-term.
  • A UTC close above $4,170 (neckline hurdle + 50-day EMA) would confirm an inverse head-and-shoulders bullish reversal and open up upside toward the psychological hurdle of $5,000.
  • The bullish case would weaken if prices drop below the support at $3,566 (Dec. 27 low).

Disclosure: The author holds no cryptocurrency assets at the time of writing.

Bitcoin image via Shutterstock; charts by Trading View

Related Stories