Bitcoin (BTC) Breaks Through Resistance: Is This Rally Sustainable?

Bitcoin (BTC) has broken out of a channel and is back above a major trendline. However, short term time frame momentum indicators have all topped out, and a CME futures gap has opened up down to $110,740. Does Bitcoin need to come back down in order to go up again?

Back down to fill the CME gap?

Source: TradingView

On Friday it was a very different story. The $BTC price looked as though it would be rejected from the top of the channel and the major ascending trendline. The bulls had other ideas, and over the weekend the price rallied strongly. On Monday the price reached $116,400 before perhaps topping out at this level.

A W pattern has formed and the price has broken through and confirmed the neckline. The measured move for this pattern would take the price all the way up to $124,000. 

That said, the $BTC price is very overbought right now and there is the issue of the CME gap to be closed just below $111,000. These gaps are generally filled sooner rather than later, so with the $BTC bulls already looking very tired, it would be a reasonable assumption to expect the price to come back down and close the gap and confirm the channel breakout, at the same time providing an opportunity for the momentum indicators to reset.

$BTC bulls battle to hold the 50-day SMA

Source: TradingView

In the daily time frame it can be seen that the $BTC price is currently trying to hold above the 50-day SMA after getting back above it earlier on Monday. It remains to be seen whether the bulls can pull this off, especially given that the Stochastic RSI indicators are perhaps looking to cross back down. 

If the price does come back down and fills in that CME gap, the 200-day SMA could continue to act as a decent support. 

Stochastic RSI indicator cross-up is key for bull market continuation

Source: TradingView

The weekly time frame illustrates that the bull market parabola is still very much intact and that the $BTC price is holding well above the 50-week SMA, which in itself is also the support for practically the entire bull market. As long as these two hold we can expect the price to continue to climb.

One very important indicator that has now turned in favour of the bulls is the weekly Stochastic RSI. The recent rally succeeded in turning the blue indicator line back up and ready to cross above the red line. If there is a confirmed cross-up, the resulting upside price momentum could send $BTC up and through the 8-year ascending trendline. When, and if, this happens, there could be spectacular consequences.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.