Bitcoin (BTC) is consolidating below $3,500 for the third day straight.
The challenge now is to gauge whether the bulls or the bears will win out in the coming days.
As discussed yesterday, the leading cryptocurrency could soon see a corrective rally if prices manage to clear the crucial resistance at $3,633 (the high of an “inverted hammer” candle on the 3-day chart) by Friday’s UTC close.
The bull case is also bolstered by bitcoin’s 14-week relative strength index, which is reporting oversold conditions for the first time since January 2015. A corrective rally, therefore, looks overdue.
The odds of a move above $3,633 would rise if BTC’s five-day-long narrowing price range ends with a bullish breakout. As of writing, the upper edge of the price range is located at $3,456 and the lower edge is seen at $3,360.
However, it’s worth remembering that BTC has repeatedly struggled to score a significant and lasting rally in recent weeks, despite the very oversold conditions.
BTC is currently trading at $3,400 on Bitstamp, representing a 0.75 percent drop on a 24-hour basis.
BTC has created a symmetrical triangle (narrowing price range) on the hourly chart. A bull breakout would validate the argument put forward by the 3-day inverted hammer candle that bargain hunters are beginning to challenge the bears’ resolve to push prices lower.
As a result, the triangle breakout, if confirmed, could yield a quick move higher to $3,633.
BTC, however, risks falling to the 200-week moving average (MA) of $3,179 if prices pierce the triangle support of $3,360. That long-term MA support will likely hold ground, as the 14-week RSI is reporting extreme oversold conditions.
Many market technicians believe that a break of an RSI trendline often precedes the break of a trendline in price.
Going by that logic, the falling channel breakout in the 6-hour chart RSI could be considered an advance warning of an impending bullish price move.
- Bitcoin could see a stronger recovery rally if prices close above $3,633 on Friday.
- A symmetrical triangle breakout on the hourly chart would boost the probability of BTC finding acceptance above $3,633.
- A symmetrical triangle breakdown would be a bearish development, although downside could be restricted around the 200-week MA of $3,179.
- That said, the bullish scenario looks more likely to play out, as the 14-week RSI is signaling extreme oversold conditions and the 6-hour RSI is biased toward bulls.
Author: Temitayo Olojede , firstname.lastname@example.org