Bitcoin broke out of its descending channel on the 1-hour time frame to signal that a reversal is due. Price also moved past its double bottom to confirm that an uptrend is underway, but resistance around the $4,400 level held.
This could mean that a correction to areas of interest around those former resistance levels might be due. Applying the Fib tool on the latest swing low and high shows that the 38.2% to 50% Fibs are close to the potential support zones.
In particular, the 38.2% level lines up with the broken 200 SMA dynamic inflection point while the 50% Fib at the $4,065 level is in line with the double bottom neckline. The 100 SMA coincides with the 61.8% Fib closer to the broken channel resistance.
The 100 SMA is below the longer-term 200 SMA to confirm that the path of least resistance is to the downside. In other words, the downtrend is more likely to resume than to reverse. However, the short-term moving average is turning higher and the gap between the two is narrowing to suggest weakening selling momentum.
RSI is still moving south, though, which means that sellers have the upper hand. The oscillator has plenty of room to head lower before indicating oversold conditions, which means that bearish pressure could persist and the correction could still go deeper. Similarly stochastic is heading south so bitcoin might follow suit until oversold conditions are met.
If any of the Fibs hold as support, bitcoin could bounce back to the swing high and beyond. Note that the double bottom spans $3,700 to $4,200 so the resulting climb could be at least $500 in height.
There are mixed factors influencing bitcoin direction for now, as the SEC Chairman noted that it will be a long time before they approve bitcoin ETFs. However, news that Nasdaq is pushing through with bitcoin futures and that institutions are carrying on with investments in the space appeared enough to spur a turn in sentiment.
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