Many observers believe the recovery rally could be extended further to resistances lined up above $8,500 and near $8,600. For instance, market analyst Josh Rager tweeted earlier today that bitcoin price could now run up to $8,500.
Bitcoin logged the biggest single-day price gain in five weeks on Monday, opening doors for a stronger recovery rally to key resistance above $8,500.
The top cryptocurrency by market value bounced up from a historically strong 100-week MA support near $7,750 and closed (UTC) at $8,205 on Bitstamp, representing a 4.47 percent gain on the daily opening price of $7,863. That is the biggest single-day price rise since Sept. 2.
Monday’s price rise could be termed as a relief rally, as the cryptocurrency was looking oversold, having dropped by more than $2,000 in the last week of September. Further, there were signs of seller exhaustion below $7,800, as discussed yesterday.
- Bitcoin could test key resistance above $8,500 in the next day or two, having eked out the biggest single-day rise in five weeks on Monday.
- The daily chart indicators have turned bullish with Monday’s price rise.
- Acceptance below the 100-week moving average (MA) at $7,756 would revive the case for a drop to $7,200.
Back then, BTC had rallied by 6.3 percent, confirming a short-term bullish reversal. The breakout, however, ended up creating a bearish lower high near $10,950 on Sept. 6.
Rager warned in another tweet that prices need to rise above $8,500 to invalidate bearish lower highs set up and confirm a bullish reversal.
Popular analyst @TheCryptoDog believes the probability of a sell-off to $7,200 has dropped with Monday’s 4.47 percent price rise and a bigger rally to $9,400 could be seen if resistance at $8,500 is convincingly breached.
As of writing, the leading cryptocurrency is changing hands near $8,200 on Bitstamp, having hit a high of $8,344.
Daily candlestick and line charts
Bitcoin created a bullish outside bar candlestick pattern on Monday (above left), which occurs when the day begins on a pessimistic note, but ends with optimism, engulfing preceding day’s high and low.
The outside bar candle is widely considered an early sign of bullish reversal, especially when it appears at the bottom of an established downtrend or a notable price drop. In BTC’s case, the candle has appeared following a drop from $10,000 to $7,715.
Further, the MACD histogram, an indicator used to identify trend strength and trend changes, has crossed above zero, confirming a bullish reversal.
Meanwhile, the daily line chart (above right) is reporting a bullish divergence of the 14-day relative strength index (RSI).
A bullish divergence occurs when the RSI produces higher lows, contradicting lower lows on the price chart. It is considered an advance warning of an impending bullish move.
All-in-all, BTC looks set to challenge Oct. 1’s high of $8,531 in the short-term. A UTC close above that level would invalidate the bearish lower highs pattern, as tweeted by Josh Rager, and confirm a breakout on the intraday chart, as seen below.
BTC is charting a double bottom pattern with the neckline resistance at $8,531. A break higher would confirm a breakout and create room for a rise to $9,348 (target as per the measured move method).
That said, more credible evidence of a bullish reversal would be a break above the 200-day MA, currently lined up at $8,586.
This is due to the fact that the 200-day MA is widely considered as a barometer of a long-term trend and served as strong resistance on Oct. 1.
The case for a drop to $7,200 would strengthen if prices find acceptance under the 100-week MA at $7,756, as discussed yesterday, although as of now that looks unlikely.