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Looking North? Bitcoin Price Dip Forms Bull Flag Pattern January 8, 2019 12 Views
Bitcoin’s (BTC) minor pullback from two-week highs could end up fueling a breakout above the key hurdle of $4,140.
The world’s largest cryptocurrency by market value jumped to $4,090 at 17:15 UTC on Sunday – the highest level since Dec. 24 – validating the short-term bullish reversal confirmed on Dec. 20.
Even so, the positive momentum has weakened slightly in the last 36 hours. As of writing, BTC is changing hands at $3,995 on Bitstamp, having clocked a low of $3,934 earlier today.
The 3 percent correction from two-week highs, however, has carved out a bull flag on technical charts. Simply put, that pattern represents a pause in the rally, which usually refreshes higher and accelerates the preceding bullish move.
So, it seems safe to say that the price pullback has pushed up the odds of an inverse head-and-shoulders breakout above $4,140. 4-hour chart
BTC has created a bull flag pattern – a bullish continuation setup – on the 4-hour chart.
A 4-hour close above the upper edge of the flag, currently at $4,005, would confirm the breakout. That would signal a revival of the rally from the Jan. 6 low of $3,753 and would open the doors to $4,340 (target as per the measured move method).
Essentially, the flag breakout could end up pushing BTC above the inverse head-and-shoulders neckline of $4,140.
More importantly, higher lows (marked by red arrow) at $3,566 (Dec. 27 low), $3,629 (Jan. 1 low) and $3,753 (Jan. 6 low) indicate that the bulls are in control. Therefore, crossing the flag resistance should not be a tough task. Daily chart
As seen above, BTC is taking the support of the 5- and 10-day moving averages (MAs), validating the short-term bullish setup indicated by these upward sloping averages.
The 14-day relative strength index holding in bullish territory above 50.00 and prices seem to have found acceptance above the 50-day MA hurdle.
The path of least resistance, therefore, is to the higher side. View A bull flag breakout, if confirmed, could yield a break above the inverse head-and-shoulders neckline level of $3,140. A UTC close above $3,140 would confirm an inverse head-and-shoulders bullish reversal (transition from the bearish-to-bullish market) and open up upside towards the psychological hurdle of $5,000. The bullish case would weaken if the flag pattern is breached to the downside. The bears may feel emboldened if BTC violates the bullish-higher low pattern with a move below $3,566 (Dec. 27 low).
Disclosure: The author holds no cryptocurrency assets at the time of writing.