Bitcoin Sets Up for Rally Toward Key $66K Resistance

The $BTC price has finally rallied after worrying investors on Sunday with a dip below the bull market trendline to $62,660. Monday dawned brightly and the price shot up to $64,500. Now becoming overbought on the shorter time frames, will some potential lateral chop turn into a bull flag?

Strong rally to $64,500: bull flag starting to form?

Source: TradingView

After escaping the bear market trendline for the first time in 10 months of trying, the $BTC price did not immediately leap to the upside to a backdrop of triumphal fireworks. Instead, the price flattened out and then slid down the bear market trendline for a few days until this trendline met with the bull market trendline. The downward price action had formed a falling wedge, and it was out of this structure that the price finally rocketed higher. A small double bottom had also formed which probably gave its own signal to the upside impetus. 

After hitting $64,500 the $BTC price was rejected, and this rejection then led to the price coming back to retest the $64K horizontal level which can now potentially become support. If this support holds, it may be that a period of sideways chop will allow the 4hr/8hr/12hr Stochastic RSI indicator lines to come back down and reset. This could form a bull flag with a measured move that could take the price back to the key $65,700 horizontal resistance level.

Inverse head and shoulders bottoming pattern

Source: TradingView

In the daily time frame we look at the potential inverse head and shoulders once again. This pattern (in green) is still in play even though the right shoulder is becoming elongated. If this pattern does play out, it can be a great bottoming pattern for the end of a bear market and transition into a new bull market.

At the bottom of the chart, the Stochastic RSI indicator lines are standing up strong and are about to pass through the mid-point of their range, signalling upside price momentum. At the same time, the RSI indicator line has just got above a new trendline, and may be about to confirm this break.

Bullish divergence adds to the bottom thesis

Source: TradingView

So has this been the bottoming pattern all along? It started at the bottom of that frightful crash down to $60K at the beginning of February this year. Since then we had the hope-filled bear market rally that threatened to break through the bear market trendline, but didn’t, and led to the next big crash which made a lower low. One more dip down to what was probably the bottom at $57,700, and then a sideways grind for several more weeks. This looks to all intents and purposes as though it is indeed the bottom that traders and investors have been searching for for the last few months.

Besides the nice-looking inverse head and shoulders pattern that is potentially completing, and which could become the springboard for the new bull market, we have bullish divergence. In the price action this started at the $60K bottom and came down to the ‘actual’ bottom at $57,700. However, there is divergence to this price action dip, in the Stochastic RSI rise over the same period. The previous two bear markets also ended with bearish divergence. Why wouldn’t this one?

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.