Having defended its 50-day moving average last week, the bitcoin-U.S. dollar (BTC/USD) exchange rate is looking up.
Now eyeing the next psychological resistance level at $4,500, BTC/USD remains well bid even despite the ripple effects of the recent regulatory news from China that caused the fall below $3,000.
At press time, it appears the country’s bitcoin exchanges are following through with earlier promises to shut down domestic trading operations, though the lack of major price movement indicates the bearish news has now been priced in.
Prices remained on the front foot over the weekend, as investors shrugged off South Korea’s decision to follow China in banning ICOs. Moreover, ether has regained poise, which has helped stabilize sentiment in the cryptocurrency space.
At press time, the BTC/USD pair is trading at $4,420 – up 2.8 percent on the day. The cryptocurrency is up 11.3 percent week-on-week, but still down 4.9 percent on a monthly basis.
The price action analysis suggests that the odds of the cryptocurrency revisiting record highs have improved following the bullish price action over the weekend.
However, patience will be tested as trend indicators signal a lack of vigor in the market. Another slight cause of concern is that volumes remain weak as well.
Daily chart (RSI/DMI)
The rebound from the 100-day moving average followed by a convincing break above the 50-day moving average (as seen in July) coupled with a bullish relative strength index (RSI) and the directional movement index (DMI) indicate scope for a rally to $4,692 (September 6 high) and possibly $5,000 (record high).
DMI is used to confirm price action, and a bullish crossover occurs when the green line crosses up through the red line.
Only a convincing break below $4,180 (confluence of the 50-day moving average and the rising trend line) would abort short-term bullish bias on bitcoin.
Trend lacks strength
Daily chart (volume)
Despite the bullish break above the 50-day moving average, volumes have remained low.
The average directional index (ADX) line is sloping downwards, suggesting the bullish move lacks strength.
Although the medium-term outlook is constructive, a minor pullback to $4,200 cannot be ruled out, courtesy of weak volumes and lack of strength as indicated by the ADX line.