by Jamie Holmes
Bitcoin has bounced back, appreciating around 6% so far on today’s opening price. BTC-USD is currently trading at $398.00 on the BitStamp exchange. Asian stock indices suffered losses, with the market making clear its preference for safe haven assets, pushing more investors toward bitcoin. The price action has recently moved above the base line, indicating bullish momentum and foretelling the current rise. The upward move is expected to extend to fractal resistances at $425.01 and $438.
The chart below shows the medium-term outlook with the 4-hour price action with the Ichimoku indicator, relative strength index and fractal levels. The price is currently testing resistance provided by the Ichimoku cloud around $410.19 and $397.72. A close above the cloud will provide a bullish outlook and see targets of $432.10, $447.34 and $465.00, fractal resistances indicated on the graph by the yellow rays.
Two bullish signals have already occurred, indicating buyers will dominate going forward; first, the conversion (blue) line has moved above the base (dark-red) line; and second, the lagging line (green, 26 periods behind) has moved from below to above the previous price action. Buyers should now look for a 4-hour session close above the Ichimoku cloud to give further confirmation. Furthermore, a change of the color of the cloud looks imminent from red to green, providing further bullish confirmation.
The price action has broken several sell fractals, which also validates a bullish outlook, where the sell fractal at $392 now acts as support instead of resistance. $372.53 is the most recent buy fractal and a move below this level is needed to validate a bearish outlook using the 4-hour timeframe. Also, a bearish outlook will be validated if the Ichimoku cloud holds as resistance and the price action closes below the conversion line, currently offering minor support at $388.51.
The graph also indicates that the relative strength index has moved above 50 and is not yet in the overbought region. The index is currently at 53.7 indicating bullish momentum is strengthening. Moreover, volumes on the BitStamp exchange have jumped higher from 174 net buy contracts to 6,181 net buy contracts at the time of writing.
Volumes precede price action and the rise in volumes traded indicates that the price will most likely continue higher. Also, on the daily timeframe there is a switch to bullish volumes with 10,494 net buy contracts so far today versus 7,223 net sell contracts yesterday, highlighting a shift in momentum.
The short-term outlook is shown below by the 1-hour price action. The price action is above the Ichimoku cloud suggesting a higher probability of an upward trend continuation. However, the relative strength index does indicate overbought conditions in the market and could see some short-term correction towards the area $388.50 to $380.00. The fractal support at $388.50 could act see increased buying interest as well as the Ichimoku cloud which lies around $380.00.
If bears manage to gain more control over the short-term, then their targets will be fractal support at $360.00, given that they manage to break the fractal at $373.63. Volumes have also declined and switched to net bearish which supports a short-term bearish outlook with a move down to the $388.50 and possibly the Ichimoku cloud as the next move before markets decide on the next direction.