Bitcoin has crossed above $9,000, confirming a bullish breakout on technical charts and opening the doors for stronger gains.
The cryptocurrency is currently changing hands near $9,075 on Bitstamp, representing a 3.5 percent gain on the day. Meanwhile, its global average price, as calculated by CoinDesk’s Bitcoin Price Index, is seen at $9,050.
Today’s rally is preceded by a bear failure at key support. Bitcoin sellers led the price action on Tuesday and Wednesday and printed intraday lows near $8,660, but could not establish a secure foothold below the 200-day average at $8,720.
Defense of the long-term average has paved the way for a bigger bull move, as expected.
Notably, with the rise from $8,660 to $9,090 (today’s high so far), bitcoin has charted a bullish inverse head-and-shoulders breakout on the hourly technical chart.
The hourly candle, representing price action in the 60 minutes to 10:00 UTC, closed above neckline resistance of $9,000, confirming an inverse head-and-shoulders bullish reversal pattern – a transition from a bearish lower-highs, lower-lows set up to bullish higher-lows and higher-highs.
The breakout is backed by an uptick in buying volumes, as represented by green bars, and has opened the doors to $9,550 (target as per the measured move method).
Seasoned traders would argue that an inverse head-and-shoulders breakout does not always accelerate the bull move and often traps buyers on the wrong side of the market. While that’s true, its effect depends on context.
If the pattern appears following a notable price drop, as is the case here, the breakout usually causes more buyers to join the market.
Further, markets often crowd out weak hands (buyers) following an inverse head-and-shoulders breakout by revisiting the former hurdle-turned-support of the neckline. So, a brief drop to or below $9,000 may be seen before rally toward higher resistance levels.
Bitcoin is flashing green, having defended the 200-day average for the second day running on Wednesday.
The cryptocurrency’s price rise is in line with a bullish reversal doji pattern confirmed on Monday.
The relative strength index has breached the descending trendline, signaling an end of the pullback from the recent high of $10,500. Further, the MACD histogram is producing higher lows in support of the bulls.
All in all, technical charts look to have aligned in favor of a rise to resistance at $9,312 (Feb. 19 low). A violation there would expose the inverse-head-and-shoulders breakout target of $9,550.
The bullish case would weaken only if prices print a UTC close below the 200-day average at $8,713.
Disclosure: The author holds no cryptocurrency at the time of writing.
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