Bitcoin Clings on Above Key Support Amid Signs of Price Pullback

Bitcoin Clings on Above Key Support Amid Signs of Price Pullback

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  • Bitcoin suffered a rising wedge breakdown, or bearish reversal, on the hourly chart earlier today. The bearish view, however, has been neutralized by the quick bounce from the key support near $5,170.
  • Acceptance below $5,170 would confirm a head-and-shoulders breakdown on the hourly chart and open the doors to $5,000.
  • A close below $4,912 on Sunday would validate the previous week’s doji candle and allow a deeper price pullback.
  • Bitcoin could challenge the recent high above $5,450 if sellers again fail to keep prices below $5,200.

Bitcoin’s (BTC) three-day run of slight gains is showing signs of exhaustion on the short-term technical charts, yet strong support below $5,190 has meant a pullback has remained elusive – so far.

The leading cryptocurrency is currently trading largely unchanged on the day at $5,250 on Bitstamp, having gained 3.4, 0.6 and 0.9 percent on Tuesday, Wednesday, and Thursday, respectively.

The gains invalidated Monday’s bearish outside reversal candle, which had called for a deeper drop below $4,900. Further, price closed above the stiff resistance of the 100-candle moving average (three-day chart) yesterday, signaling a continuation of the rally from April 2 lows below $4,200.

That several long-term indicators have recently turned bullish seems to have strengthened bullish expectations.

This is evident from the fact that bitcoin has established new support just below $5,200 over the last 72 hours, despite persistent price-negative developments like bearish patterns and indicator divergences on the shorter-duration charts.

Hourly chart

On the hourly chart, BTC dived out of a rising wedge pattern at 01:00 UTC today, confirming a bearish reversal.

The follow-through to that bearish setup, however, has been bullish. As seen above, prices have bounced up from $5,180 and are currently looking to re-enter the rising wedge.

Notably, the $5,180–$5,170 range has put a floor under bitcoin’s price for the second time in the last 72 hours.

The cryptocurrency had been feeling the pull of gravity on April 17, courtesy of the bearish divergence of the relative strength index. The pullback, however, ran out of steam around $5,170 with prices rising to $5,325 yesterday.

As a result, if the bears can pull off a break below $5,170, it may invite strong selling pressure and open the doors for a deeper price pullback, possibly to $5,000.

The case for a price pullback looks stronger if we take into account the fact that acceptance below $5,170 would also confirm a head-and-shoulders breakdown – a bullish-to-bearish trend change.

Sellers, however, would need to act quickly, as another strong bounce from levels below $5,200 could entice buyers and lead to a sustained move toward the recent highs above 5,450.

Weekly chart

BTC created a doji candle last week, signaling bullish exhaustion, as discussed earlier this week. As a result, Sunday’s (UTC) close is pivotal.

The buyer exhaustion signaled by the doji would gain credence if the price settles below the candle low of $4,912 on Sunday, possibly leading to a deeper correction next week.

A bullish close above $5,466 (doji high) would strengthen the long-term falling channel breakout seen earlier this month and open the doors to $6,000.

That looks unlikely in the short-term, though, as prices are struggling to find acceptance above a number of key moving averages (MAs) lined up in $5,200–$5,500 range.

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

Bitcoin image via Shutterstock; charts by Trading View

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