The bitcoin price on Friday posted one of its most robust bullish sessions in weeks as it rose as much as 10.5 percent in just twelve hours.
The bitcoin-to-dollar exchange rate (BTC/USD) established a higher high towards $3,710, up 10.38 percent from the Asian session open. It was not a matter of technicals only; the fundamentals also played an important role in catalyzing the ongoing bitcoin bull run.
Robert J. Jackson Jr., a commissioner at the US Securities and Exchange Commission (SEC), said in an interview that the regulatory agency would eventually approve a bitcoin ETF. The news, it seems, helped bitcoin revive its bullish sentiment.
As of now, BTC/USD is trending inside an overbought territory. The pair expects to correct lower as the market heads out of the US session.
The falling wedge pattern mentioned in our previous analysis validated its presence. As CCN reported, the bitcoin price did break above the wedge resistance and overperformed its upside momentum by jumping above its 4H 200-period moving average. As a result, our intraday long positions brought home a decent profit.
However, the surge does not guarantee a bullish revival in the long-term. Bitcoin first needs to establish a support area to ensure that what we witnessed was not a false breakout. The ongoing correction is giving us plenty of potential floors, beginning with the $3,600-level. If this area is broken to the downside, then the price could target the 4H 200-period moving average (depicted in red) for a potential pullback.
Meanwhile, it is essential to see how the previous falling wedge formation worked out for bitcoin. Between November 24 and December 15, BTC/USD was trending inside a falling wedge. After reaching the apex, the pair attempted a successful breakout action – also confirmed by increased trading volume – to reclaim $4,412. It fell just short and pulled back from $4,235, the level which now serves as the breakout target for the current wedge formation.
Therefore, unless bitcoin breaks above $4,235 – or even $4,116 – then, according to our theory, it would remain inside a false breakout area, which is hardly bullish.
A Fibonacci retracement chart drawn from swing high at $4,235 to low at $3,340 provides us with levels where bitcoin could attempt a pullback. As of now, the next resistance target is at $3,682. If it’s broken, then the price would eye $3,788 for a potential move. And so on. We also intend to treat these levels as our intraday targets.
Consequently, a break above $3,682 would have us enter a long position towards $3,788. Meanwhile, we will minimize our losses by maintaining a stop loss order 1-pip below the local swing high. Similarly, a break below $3,552 would have us open a short position towards $3,340 with a stop loss placed 1-pip above the local swing low.
Featured Image from Shutterstock. Charts from TradingView.