Bitcoin Tests 9,000 and is Poised to Move Higher

Bitcoin prices are attempting to break out after a bull flag continuation pattern which is a pause that generally refreshes higher.  The trend in bitcoin prices is turning after the cryptocurrency created a circle formation as a bottom. Momentum on bitcoin prices has turned positive, but the acceleration in the move has pushed daily prices into overbought territory which a short-term correction could occur.

Bitcoin Prices Have Broken Out

Bitcoin prices broke out of a downward sloping daily trend line that connects the highs in August of 2019 to the highs in October of 2019 and comes in near 8,400. This has led to active bitcoin trading. This breakout level is now short-term support. Additionally, short term support on bitcoin prices comes in near the 10-day moving average near 8,350. Target support on bitcoin is seen near the 50-day moving average at 7,510. The first level of target resistance on bitcoin prices is seen near the October highs at 10,350.

A bull Flag Has Been Created

Prices have formed a bull flag continuation pattern. This is a technical analysis pattern where prices breakout and then consolidate. As prices consolidate, they form the body of the flag. In a bull flag pattern after the continuation prices refresh higher continuing the upward trend in prices. The trend in bitcoin prices is upward. In January the 10-day moving average of bitcoin prices crossed above the 50-day moving average. When this occurs a short term, uptrend is considered in place.

Momentum has Turned Positive

Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is now printing in the black with an upward sloping trajectory which points to higher bitcoin prices. Weekly momentum on bitcoin prices is poised to turn positive as the weekly MACD line is about to generate a crossover buy signal. The MACD histogram is fast approaching the zero-index level which is a sign of an impending buy signal.

Could Prices Be Overbought

The recent upward movement of bitcoin prices has pushed the relative strength index (RSI) toward the overbought trigger level of 70. The RSI is a momentum oscillator that measures the movements of prices over the past 14-days and creates and index from 1-100. Levels above 70 are considered overbought and levels under 30 are considered oversold.

Additionally, the fast stochastic, which is another momentum oscillator generated a crossover sell signal in overbought territory. With the crossover occurring above the 80 overbought trigger level, short term positive momentum has ended and likely has turned negative. Reading on the fast stochastic above 80 are consolidate overbought and reading below 20 are considered oversold.


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