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Bitcoin recently broke through the top of a symmetrical triangle consolidation pattern to signal that bulls are in control. However, resistance around $4,300 held and price is back down to the broken resistance.
This could constitute a much-needed retracement from the recent climb, and holding as support could allow more buyers to join in. Applying the Fibonacci extension tool on this move shows that the 50% level lines up with the swing high while the 61.8% level is close to the $4,400 mark. Stronger bullish momentum could take it up to the 78.6% level at $4,525 or the full extension just past the $4,700 mark.
The 100 SMA is still above the longer-term 200 SMA to confirm that the path of least resistance is to the upside. This means that there’s a stronger chance for support to hold than to break. The gap between the moving averages is widening to reflect stronger bullish momentum, but bitcoin has fallen below the 100 SMA dynamic inflection point.
RSI has dropped to the oversold region, though, indicating that sellers might be exhausted and willing to let buyers take over. Stochastic is also dipping into the oversold territory to suggest that bears might take a break from here. Sustained selling pressure could take bitcoin to the next support at the 200 SMA near the bottom of the triangle.
The cause for the sharp drop hasn’t been apparent, so many are chalking this up to just profit-taking at key resistance levels in anticipation of bigger moves in the days ahead. Analysts have been giving more bullish forecasts on how bitcoin has bottomed out, with some saying that a further dip to $1,000 or even below $2,000 might be unlikely.
Besides, sentiment could favor more gains as all eyes are on Fidelity’s upcoming launch of its institutional platform. Any glitches, however, could mean more dips in price action.
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