The market sentiment turned extremely bullish after yesterday’s bitcoin move. A series of deadly wicks seen in the past week ended and bitcoin bulls finally managed to orchestrate a break above the descending channel resistance. The daily candle even managed to close above the channel resistance line, inside the Ichimoku cloud.
As I said in the previous bitcoin update I expected a similar move. But to be honest I was a bit surprised that the 3,850 resistance area got rolled over without a struggle. For such a job to be done we needed volume. And oh boy we got one. We witnessed the highest volume of this year. And that is what you call a textbook breakout. A trend continuation is expected. However the price won’t go just straight up towards the 5k (Or will it!?). After such a push a correction is a natural thing to happen.
Bitcoin: daily time frame
As mentioned above the bitcoin price broke out of the descending channel. Right now I’m looking for a re-entry and hopefully we’ll get a pattern from which an entry will be possible. The important levels I’m watching right now for a retrace is the Ichimoku cloud base line, currently at $3,790 which will serve as support. Going below the $3,660 area, the current lower range boundary, will be a bad sign for the bulls. A full retrace will be on the table if that happens. Ideally the channel resistance will turn into support and from there we would see another leg up.
That said, on the way up the first important resistance level is at around $4,100. This is the pivot-high from the January 8th. If bitcoin manages to break above it the next one lies at around $4,400. This is also the area where we get the 100% Fibonacci extension level. Higher up lies a major resistance area at around 5k that will be difficult to break through. There is a strong confluence between the 200 day MA, the Ichimoku upper cloud boundary and the 161% Fibonacci extension level. And if that is not enough that’s the area where the deadly descending diagonal comes in play again. All will serve as a strong resistance.
Looking at the RSI indicator we are again in overbought levels (slightly above 70). Last time we were there was last year in July. A retrace towards 64 levels is possible before the trend continuation. I’ll also be very cautious if/when we hit the 80 overbought levels. In 2017 and 2018 those extreme levels were only surpassed 3 times and we were in a bull market. In other 9 cases bitcoin experienced a strong reversal.
Altcoin market: bullish sentiment!
We got the confirmation, the altcoin market cap made a convincing break upwards.The RSI indicator proved again to be very reliable (triangle breakout). The volume kicked in and now it is in the yearly highs. It seems that the first resistance is at around 68 billion. If the cap manages to push above it, then the next one lies at 81 billion.
The 5K area seem to be in our grasp. But, as I said, it’s not a straight line that is leading us there. The market has definitely some surprises in store for us in the coming weeks.