As Bitcoin (BTC) breaks through key resistance levels, one analyst suggests the cryptocurrency is positioning itself for a move higher and a retest of a key technical area in the coming weeks.
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Bitcoin nears make-or-break test
On Tuesday, Bitcoin rose 2.5% to retest the $93,500 resistance level for the first time in a week. The cryptocurrency has been hovering between the $84,000 and $93,500 price range for three months and has failed to convert this level into support several times.
Analyst Rekt Capital recently noted that the flagship crypto is approaching a “historic” test as it begins to form “another technically decisive region” just above current price levels.
The market watcher explained that BTC is approaching its dynamic Bull Market Exponential Moving Average (EMA) cluster, where the 50-week EMA and the 21-week EMA are closing in.
This key cluster, currently between the $96,000 and $97,500 levels, has historically been tested before a “meaningful crossover,” where the Bitcoin price moves too high outside the cluster.
However, this was usually followed by a failed confirmation of this region as support. “When that happens, the crossover itself often follows the bearish price event, rather than causing it, with the EMA cluster moving into resistance from below and leading to downward continuation,” the analyst explains.
In particular, previous cycles show that the 50-week and 21-week EMAs can move very close together, Rekt Capital wrote, highlighting that they can even overlap for longer periods before a decisive crossover occurs.
Currently, Bitcoin has yet to retest and extend beyond the two EMAs, but historical performance suggests this is likely to happen. Additionally, BTC’s price is “positioning itself in a way that could springboard higher, potentially allowing for a test of this cluster in the coming weeks. The key question is timing.”
BTC price breaks out of key resistances
In his analysis, the market observer discussed BTC’s recent performance, which has undergone a structural change despite the sideways price action. Last week, the cryptocurrency’s price closed above the multi-week downtrend, which has served as a key resistance point since late November.
This marks “a small but notable technical milestone” as Bitcoin now remains above the November and December highs in the weekly time frame, with previous resistance considered support.
Furthermore, the midzone of the local range, around the $90,500 level, is now “almost perfectly confluent with the former Downtrend, meaning that the Downtrend that rejected price last week is instead starting to act as layered support.”
Therefore, if Bitcoin continues to hold the mid-range, the price should be able to challenge higher levels and find a path towards $100,000. Rekt Capital added that unlike previous retests, the latest rejection of the crucial resistance at $93,500 was significantly shallower and shorter, indicating it was getting weaker.
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Now, the flagship crypto has successfully retested the downtrend breakout area as support and temporarily reclaimed the USD 93,500 resistance, pushing above the USD 94,000 area once again.
Ultimately, BTC will need to hold this area and close the week above $93,500 to “initiate a breakout from the weekly range as indicated in previous green circles,” the analyst said. concluded.
At the time of writing, BTC is trading at $94,334, up 2.6% on the weekly time frame.
Featured image from Unsplash.com, chart from TradingView.com