The Bitcoin (BTC) price has turned back up on Wednesday and is a very short distance from a key breakout level that would likely take the king of the cryptocurrencies back to the all-time high if it can be broken and held above. Can Bitcoin put on a spurt and break this level, or will relatively overbought conditions lead to a rejection?
$BTC approaches breakout zone
Source: TradingView
The above 8-hour chart shows the $BTC price returning to the top of a parallel channel. The fact that horizontal resistance converges with the top of the channel means that this level is going to be a difficult one to break.
It must be noted that this level has become the most important zone for the bulls, given that a breakthrough here would likely lead back to the all-time high, with only the $117,400, and the $120,000 horizontal levels providing any kind of resistance. Just taking into account the measured move for the channel breakout would push the price up above $129,000.
$BTC holds above 50-day SMA
Source: TradingView
The daily chart reveals that the $BTC price is holding above the 50-day SMA. This means that buyers are defending the intermediate trend. As long as this remains the case, this is a bullish occurrence. That said, if this 50-day SMA is dropped and confirmed below, this could lead to the price falling back down, perhaps all the way to the bottom of the channel.
The Stochastic RSI indicators are climbing in this time frame, and the RSI indicator has already crossed up above the yellow moving average line. If it can also cross above the downtrend line, this would likely coincide with a breakout of the channel in the price action.
Huge implications on the 2-week chart
Source: TradingView
Zooming right out into the 2-week chart there are very important implications to take into account. Firstly, bearish divergence continues to be a very dangerous consideration for the bulls. As the price action has risen, the Stochastic RSI and the Relative Strength Index have continued their downtrends. On such a high time frame this is the kind of thing that puts an end to a bull market. However, there is still the chance that the bearish divergence can be nullified, especially if $BTC embarks on a prolonged multi-month price rise.
The first sign of just such a rise could be the change in the Stochastic RSI indicators. These indicators generally travel all the way to the bottom once they cross down, but in this case it looks as though the 50.00 level could act as support, allowing the indicators to head back up again. This could be a hugely bullish event for the $BTC price, and can signal a return to strong upside price momentum.
Right at the bottom of the chart, the RSI indicator will need to cross up through the descending trendline and start on the long climb to take it above 87.7 and nullify the bearish divergence.
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