Bitcoin Slows as Price Struggles to Breach $6,000
Evidence is growing that a recent rally in bitcoin prices may be nearing its end.
While bitcoin has been on a tear of late, rising from a Sept. 29 low of $2,980 to new highs above $5,800 last week, the bitcoin-US dollar (BTC/USD) exchange rate failed to capitalize on this upward movement over the weekend’s trading sessions.
At press time, bitcoin is trading at $5,700, up 2.5% over the last 24 hours as per CoinMarketCap. Week-on-week, the crypotcurrency is up 19%, while on a monthly basis it is up 52%.
As for the specific reasons for the increase, pundits and observers are still struggling to identify a catalyst for the blast above the psychological hurdle of $5,000. However, one of the more plausible theories is that many are buying bitcoins on hopes that a hard fork in November might end up creating money out of the thin air.
For now, though, it appears as though the bulls are having a breather.
But while possibly deserved, it’s worth noting they risk losing control in the short term if prices close today below the previous day’s low of $5,455.
The chart shows:
- Sunday’s price action has produced a “hanging man” candlestick pattern
- Bitcoin’s price suffers a corrective pullback every time the stochastic and the relative strength index (RSI) signal overbought conditions (marked by hand sign and red circles on the chart).
The stochastic oscillator is a chart analysis indicator that helps determine where a trend might be ending, while “hanging man” forms at the end of an uptrend and is created when there is notable sell-off (prices dropped to $5,455 yesterday) but bulls are able to push the prices near their opening levels.
In this case, the underlying asset (in this case bitcoin) eventually closes with marginal losses, while the resulting candlestick resembles a hanging man with dangling legs.
The candlestick following the hanging man should close below the low of the hanging man candle ($5,455). It would confirm a short-term bullish-to-bearish trend change.
View
- A close below $5,455 today would indicate the rally has found a temporary top at $5,867 (Oct. 13 high). The cryptocurrency could then revisit $5,100-$5,000 levels.
- On the other hand, a break above $5,867 (Oct. 13 high) could see prices test $6,000 levels.
- Caution is still advised as indicators signal short-term overbought conditions.
by 