Bitcoin's (BTC) has made a high volume recovery from five-week lows, although a bullish reversal is still not confirmed, technical studies indicate.
The leading cryptocurrency fell to $6,100 on Bitfinex at 18:00 UTC yesterday – the lowest level since Aug. 14 – signaling a downside break of the trendline connecting the June low and Aug. 11 low (lower edge of the pennant).
However, the cryptocurrency picked up a strong bid just an hour later and jumped to a high of $6,550. More importantly, trading volumes on Bitfinex increased by 66 percent during the price recovery.
While the persistent failure to beat the key support could be taken as a sign of bearish exhaustion, the upside is seen gathering pace only above $6,600 (Sept. 14 high).
At press time, BTC is trading at $6,400, representing a 1.10 percent gain on a 24-hour basis.
As can be seen, the big move higher witnessed during the 60 minutes leading up to 19:00 UTC yesterday was backed by a jump in trading volumes. However, so far, the follow-through has been anything but encouraging.
Nevertheless, the strong rebound from $6,100 has established the figure as a key near-term support.
Bitcoin remains stuck in no-man's land on the daily chart defined by the lower end of the pennant pattern and the Sept. 14 high of $6,600.
As of writing, the pennant support is located at $6,225. A UTC close below that level would signal a revival of the sell-off from May highs near $10,000.
On the other hand, a move above $6,600 would imply a double bottom bullish reversal. This scenario is looking increasingly likely, courtesy of repeated rebounds at the lower end of the pennant pattern.
- BTC's high volume reversal from $6,100 has raised the odds of a break above $6,600 (double bottom neckline).
- A double bottom breakout, if confirmed, would open the doors to $7,100 (target as per the measured move method).
- On the downside, a UTC close below $6,225 (trendline support) may yield a drop to $5,859 (August low) and $5,755 (June low).
Disclosure: The author holds no cryptocurrency assets at the time of writing.