Bitcoin (BTC) could be in for a minor price pullback, having clocked a 39-day high above $7,500 earlier today, technical charts indicate.
The leading cryptocurrency rose to $7,562 on Bitfinex at 03:00 UTC and was last seen changing hands at $7,400 â up nearly 10 percent on a 24-hour basis. Further, the price rally has pushed the week-on-week gains higher to 15 percent.
On Tuesday, BTC crossed the inverse head-and-shoulders neckline resistance of $6,838 with strength, confirming a short-term bearish-to-bullish trend change.
So, a rally to $7,900 (inverse head-and-shoulders breakout target) could be on the cards. However, the move may not happen in the next 24 hours as the retreat from $7,562 to $7,370 indicates the bulls areÂ keen on booking profits, having pushed BTC higher by more than $1,300 in the last 72 hours.
Further, the technical charts are also reporting intraday overbought conditions, meaning a price pullback could be in the offing before the rally continues. Moreover, investors who missed the initial move higher would have the opportunity to board the BTC freight train on any price pullback.
A minor correction, if it occurs, could end up recharging the engines for a sustained rally to $7,900â$8,000.
The above chart shows BTC has pulled back from near 100-day moving average (MA) hurdle of $7,613. Still, the bias remains bullish as the cryptocurrency has found acceptance above the 50-day MA.
The short-term moving averages (5-day, 10-day) are rising in favor of the bulls and the 5-day MA has cut the 50-day MA from below, confirming a bullish crossover.
What's more, the relative strength index (RSI) has also adopted a bullish bias (above 50.00).
As a result, BTC is more likely to extend the rally to $7,900â$8,000 in the short-run and confirm a successful reentry in the pennant pattern. That would be a major blow to BTC bears as the bearish pennant breakdown in June had signaled a revival of the sell-off from the record high of $20,000 reached in December.
A move back inside the pennant pattern would signal a long-term bearish invalidation. Meanwhile, a break above the pennant resistance, currently seen at $8,210, would strengthen the odds of a long-run bullish reversal.
The RSI is beginning to roll over from the overbought territory (above 80.00) and the price pullback will likely gather pace if RSI drops below support at 58.00. Hence, we are unable to rule out a drop in BTC prices to $7,000.
That said, the dip is expected to be short-lived as the 50-hour MA, 100-hour MA, and 200-hour MA is located one above the other, indicating the path of least resistance is to the upside.
- BTC price is seen rallying to $8,000 in the short-run, albeit after a healthy pullback to $7,000.
- The technical correction will likely help BTC chart a more sustainable rally to $8,000.
- Only a daily close (as per UTC) below $6,839 (inverse head-and-shoulders neckline) would abort the bullish view.
- A close below $6,080 (July 12 low) would shift risk in favor of a drop to $5,755 (June 24 low).
Disclosure:Â The author holds no cryptocurrency assetsÂ at the time of writing.