The Bitcoin price has experienced a remarkable increase of over 4% over the past 12 hours, marking a break from the recent lull. This move follows a bull pennant breakout, with Bitcoin’s price now aiming towards the $55,000 mark.
The 4-hour chart below (BTC/USD) shows Bitcoin trading at $44,609, having just crossed the boundaries of a bullish pennant pattern – a bullish continuation signal that is often followed by an upward price trajectory.
What this means for the Bitcoin price
The pennant, which is characterized by converging trend lines after a substantial price move, indicates a pause in trading before the market resumes the previous uptrend. The breakout of the pennant suggests a continuation of the bullish trend with a potential target often extrapolated based on the length of the previous move, known as the flagpole, that initiated the pennant formation.
Looking at the moving averages, Bitcoin is showing a golden cross pattern, with the 20-period EMA (currently at $43,389) rising above the 50-period EMA (currently at $43,049) and the 100-period EMA (currently at $42,727). This cross supports the bullish sentiment in the market.
Volume, a key indicator of the power behind price movements, also rose as the breakout occurred, further confirming the bullish scenario.
The Fibonacci retracement tool, applied from the swing high at $49,092 to the swing low at $38,484, shows Bitcoin’s price breaking above the 0.5 ($43,788) retracement level. The next critical levels to watch are the Fibonacci levels of 0.618 ($45,040) and 0.786 ($46,822), which could act as resistance in the short term.
Additionally, the full 1.0 extension ($49,092) is on the horizon, with the 1,618 extension ($55,648) closely aligned with the $55,000 target, reinforcing its significance as a potential price target.
The RSI, at 73.47, indicates strong buying pressure, but also signals caution as the market approaches an overbought situation. However, it is important to note that at its strongest moments, Bitcoin price tends to reach very high levels, showing tremendous momentum. Therefore, it is essential that traders pay attention to possible divergences that could indicate a weakening of current momentum.
In short, Bitcoin’s break above the bullish pennant pattern has set the stage for a possible rally towards the $55,000 mark. The crossing of the golden cross, increased volume and Fibonacci extension levels add credibility to the bullish outlook.
However, traders should remain vigilant for overbought conditions that could lead to a retest of key support levels. The most crucial support is found at the Fibonacci level of 0.5 ($43,788), with further support levels at 0.382 ($42,536) and 0.236 ($40,988). A sustained move below these levels could question the bullish thesis and shift focus to the next key support at $38,484.
Featured image created with DALL·E, chart from TradingView.com
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