Bitcoin (BTC) is looking increasingly bullish on a key technical chart following its strong move above $4,000.
The leading cryptocurrency by market value first teased bullish reversal on Dec. 17 with the creation of an “outside reversal” candle on the widely followed 3-day chart. The early indicator of a bearish-to-bullish trend change, however, needed confirmation in the form of a positive follow-through.
Alongside BTC’s $600 rally, the cryptocurrency closed above $4,000 yesterday confirming the bullish reversal on the 3-day chart.
BTC, therefore, could rise to next major resistance of $4,400 in the near-term.
As of writing, the cryptocurrency is trading at $4,000 on Bitstamp, largely unchanged on a 24-hour basis.
Confirmation of the bearish-to-bullish trend change can be seen on the 3-day chart above, where the last candle has ended well above $3,590 – the high of Monday’s outside reversal candle.
Adding credence to that positive trend change is BTC’s move above the 10-candle exponential moving average (EMA) yesterday.
Further, the relative strength index (RSI) has jumped into undersold territory, validating a bullish divergence created on Dec. 15.
On the daily chart, BTC created a “gravestone doji” candle on Wednesday – widely considered an early sign of bearish reversal. The recovery rally from 15-month lows near $3,100 would likely have ended had BTC closed yesterday below $3,642 (Wednesday’s low).
The cryptocurrency, however, closed well above $3,924 (high of gravestone doji), reinforcing the bullish view put forward by Tuesday’s convincing close above $3,633.
Other technical studies are also biased toward the bulls. For instance, the 5- and 10-day EMAs are trending north and the 14-day RSI is holding well above 50.00.
- A bullish reversal is confirmed on the three-day chart.
- BTC could extend the ongoing rally to $4,400 in the next few days.
- A daily close below $3,633 would abort the bullish setup, although the probability of a bearish close happening in the near term is low.
Disclosure: The author holds no cryptocurrency assets at the time of writing.
Bitcoin image via Shutterstock; charts by Trading View