Bitcoin (BTC) could witness a minor corrective rally if the bulls’ persistent defense of key support leads to a break above the resistance at $6,400, technical charts indicate.
The leading cryptocurrency suffered a downside break of the symmetrical triangle in the early U.S. session yesterday, signaling a revival of the sell-off from the recent highs above $7,400.
Further, the bearish pattern bolstered the already negative setup, as represented by the rising wedge breakdown and the pennant breakdown on the line chart.
As a result, BTC was looking likely to test $6,000 (February low) before the UTC close yesterday. Instead, it bounced back from $6,170 — the support of the trendline connecting the June low and Aug. 11 low — and closed largely unchanged on the day at $6,290.
At press time, BTC is changing hands at $6,250 on Bitfinex and the trendline support is seen slightly higher at $6,180.
As seen in the above chart, the lower end of the pennant pattern – the trendline sloping upwards from the June low – is proving a tough nut to crack. This could be considered a sign of bearish exhaustion, given that the crucial support is holding ground after a 16 percent drop.
That argument has merit since the cryptocurrency created a “spinning bottom” candle yesterday, signaling indecision in the marketplace.
A UTC close today above $6,400 (previous day’s high) would validate the spinning bottom candle, opening doors to a stronger corrective rally toward $6,830 (10-week moving average).
On the other hand, acceptance below the pennant support will likely accentuate the bear case.
- BTC’s repeated defense of the key price support has neutralized the immediate bearish outlook.
- A convincing break above yesterday’s high of $6,400 would confirm a spinning bottom bullish reversal and could yield a test of supply around the resistance at $6,800 (multiple daily highs).
- A UTC close below $6,180 (pennant support) would add credence to the rising wedge breakdown witnessed earlier this month and would open up downside towards the June low of $5,755.
Disclosure: The author holds no cryptocurrency assets at the time of writing.
Chart image via Shutterstock; Charts by Trading View