Bitcoin Bull Reversal Sighted, But Momentum Proves Weak
#Bitcoin bulls seem to have gained an upper hand, but the cryptocurrency is still struggling to find follow-through buying today.
#On Wednesday, CoinDesk's Bitcoin Price index (BPI) closed (as per UTC) 5.15 percent higher at $11,399. The positive close above $11,000 adds credence to the solid defense of the $10,000 mark seen earlier this week.
#That said, the follow-through is not necessarily encouraging.
#The BPI clocked a high of $11,711 at 03:59 UTC today before falling back below $11,200. As of writing, the BPI stands at $11,350. The cryptocurrency has appreciated by 3 percent in the last 24 hours, says data source OnChainFX.
#Bitcoin chart - Bull reversal confirmed
#The bullish doji reversal at the key support of $10,391.02 (50 percent Fibonacci retracement of 2017 low to 2017 high) validates the argument that BTC has built a base around $10,000 and points to a short-term bearish-to-bullish trend change.
#The 5-day MA and 10-day MA carry a bearish bias and could limit the upside in BTC.
#A bullish doji reversal occurs when a doji candle (as seen on Tuesday) is followed by a positive price action (yesterday's 5 percent gain).
#So, the short-term outlook is bullish. Still, there is merit in being cautious.
#Comments on social media indicate the investor community is not convinced by previous day's bullish price action and wants to see a sustained move above $11,500 before calling a bottom. The argument has substance says the chart below.
4-hour chart
#The above chart (prices as per Coinbase) shows-
#Bitcoin witnessed a solid recovery on Jan. 17 from the low of $9,005 on the back of strong volumes.
#However, volumes have dropped in the subsequent days. This could be the reason behind bitcoin's failure to rise above the falling trendline hurdle on Jan. 20 and Jan. 21.
#BTC has had another go at the trendline resistance today, but once again volumes remain low.
Higher lows as represented by the rising trendline.
View
#Bullish doji reversal was confirmed yesterday, but so far bitcoin has been unable to generate the follow through necessary to declare that the bottoming process is complete.
#Only a high volume break above the trendline resistance on the 4-hour chart would add credence to the bullish doji reversal and open doors for a sustained move higher to $13,000 and $14,250.
#On the other hand, rejection at the falling trendline followed by a high volume drop below $10,300 (rising trendline support on the 4 - hour chart) could yield re-test of last week's low of $9,005.
#That said, only a daily close (as per UTC) below $10,391.02 (50 percent Fibonacci retracement of 2017 low to 2017 high) would revive the bearish outlook.
#Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Coinbase.
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