Bitcoin (BTC) market has had a bullish start to the week, but the momentum could wane in the next few days, technical studies indicate.
The leading cryptocurrency rose to a fresh two-month high of $8,130 on Bitfinex today, having witnessed an inverse head-and-shoulders breakout last week.
The 39 percent rally from the seven-month low of $5,755 reached on June 24 has put the bulls back in a commanding position. Hence, further gains could be on the cards, albeit after a brief pause or a price pullback as a key technical indicator is flashing overbought conditions.
At press time, BTC is changing hands at $8,100 on Bitfinex — up 40 percent from the seven-month low of $5,755 reached on June 24.
The relative strength index (RSI), one of the most widely used momentum indicators, jumped above 70.00 (overbought zone) earlier today and is currently located at 74.56 — its highest level since December.
So, it could be said that bitcoin is at its most overbought level in seven months.
As a result, the cryptocurrency may find it hard to gain a foothold above the immediate resistance of $8,140 (pennant resistance) in the next few days and could see a minor price pullback.
That said, a technical correction, if any, will likely be short-lived as the other tools are biased towards the bulls. For instance, the 5-day and 10-day MAs are trending north, indicating a bullish setup.
The cryptocurrency has found acceptance above the 50-day MA and 100-day MA. Meanwhile, the short duration charts are also calling a further price rally.
The broadening wedge breakout indicates a continuation of the rally from the July 17 low of $6,740. Accordingly, the attention has now shifted to the significant price obstacle of 200-day MA, currently located at $8,676.
- BTC’s break above $8,000 has bolstered the already bullish technical setup, however, overbought conditions could cap the upside around $8,150 in the next few days.
- A pullback to ascending (bullish) 10-day MA, currently $7,570 and seen sloping upwards to $7,700 in the next 48 hours, cannot be ruled out and will likely end up refueling the BTC freight train for a sustained move towards the 200-day MA of $8,676.
- Only a daily close (as per UTC) below $7,221 (July 21 low) would abort the bullish view.
Disclosure: The author holds no cryptocurrency assets at the time of writing.
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Author: Omkar Godbole