Bitcoin could be done with its slide as it forms an inverse head and shoulders pattern on its 1-hour time frame. This is seen as a typical reversal signal, so a break past the neckline could confirm that an uptrend is in the cards.
The neckline is around the $6,500 level and the chart pattern is around $800 tall, which suggests that the resulting breakout could be of the same height. The 100 SMA is crossing above the longer-term 200 SMA to indicate that the path of least resistance is to the upside. In addition, the moving averages also appear to be holding as dynamic support levels.
RSI is pointing up to signal that bullish pressure is present while stochastic is also heading higher, so bitcoin could follow suit. However, both oscillators are nearing overbought levels and turning lower could bring selling pressure back in.
Some say that the bounce is merely a short-squeeze from the earlier declines while others say that it was spurred by the pickup in risk appetite. This was seen across the financial markets as US and China are scheduling trade talks for next week, possibly giving enough time to withdraw the latest round of tariffs to take effect by August 23.
Still, the fact that bulls are strongly defending key support levels suggest that a bigger bounce may be in order, and positive catalysts might be needed to sustain any rallies past areas of interest. If those continue to keep gains in check, bitcoin could once again find itself testing those long-term floors around $5,800 to $6,000.
Looking ahead, there are no major catalysts lined up from the cryptocurrency or the US economy. Then again, most of bitcoin’s action is headline-driven or sensitive to overall market sentiment. Also keep in mind that the economic risks in Turkey might also wind up being bullish for bitcoin if the situation worsens.
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