- Bitcoin gained 7.8 percent on Friday, confirming a falling wedge breakout on the daily chart. The bearish-to-bullish trend change was backed by a jump in trading volumes to levels last seen in mid-November.
- Prices could soon cross the 50-day moving average resistance at $3,642 and test resistance levels lined up at $3,800 and $4,000 in the next few days.
- A break below the Jan. 29 low of $3,322 would invalidate the bullish setup. That looks unlikely, though, as the high-volume wedge breakout has confirmed bearish exhaustion signaled by falling volumes on the weekly chart.
Bitcoin (BTC) saw a high-volume bullish move Friday that may have opened the doors for a rally above $3,800.
The leading cryptocurrency by market capitalization jumped to $3,711 on Feb. 8 – the highest level since Jan. 19 – and ended the day with a 7.8 percent gain, according to Bitstamp data. That’s the biggest single-day rise since Dec. 28
The rally to three-week highs confirmed an upside break of the falling wedge – a bullish reversal pattern carved out in the last five weeks.
Notably, trading volumes jumped 54.6 percent to $7.73 billion on Friday, according to CoinMarketCapdata. The rise represents the first time volume has passed $7 billion since Dec. 24 and the highest reading in nearly three months. Further, the three-day average of 24-hour trading volumes has jumped well above $6 billion for the first time since Dec. 25.
The bullish breakout, therefore, looks to have legs and prices could soon crack the 50-day moving average (MA), which has has been serving as a strong resistance since Friday.
As of writing, BTC is changing hands at $3,595 on Bitstamp, representing an 8.2 percent gain on the January low of $3,322. The 50-day MA is currently located at $3,642.
BTC’s jump to highs above $3,700 confirmed a falling wedge breakout, but failed to close above the 50-day MA, as per the daily chart.
While that average hurdle, currently at $3,642, has capped upside in the last 48 hours, the strong volumes suggest it could be passed soon.
Further, the 5- and 10-day MAs are trending north, having produced a bullish crossover over the weekend and the 14-day relative strength index (RSI) is also reporting bullish conditions with an above-50 reading.
As a result, BTC could soon rise toward $3,800 (Jan. 19 high) and possibly to the psychological resistance of $4,000.
A convincing break above the 50-candle MA on the 6-hour chart also supports the bullish reversal seen on the daily chart. Acting as resistance, the MA had blocked several attempted corrective rallies over the last three weeks.
BTC rose by 6.9 percent last week – the biggest weekly rise since mid-December – amid bearish exhaustion signaled by the slide in volumes in the last 10 weeks.
The cryptocurrency closed last week above the 10-week MA, neutralizing the immediate bearish view. Further, the 5- and 10-week MAs have shed bearish bias (are flatlined).
Author: Temitayo Olojede , firstname.lastname@example.org