Bitcoin (BTC) has been trading in a narrowing price range over the past week, but a bullish breakout is looking likely, the technical charts suggest.
The cryptocurrency created a bearish outside-day candle last Wednesday, signaling the rally from the low of $6,425 had run out of steam. However, the bitcoin bulls ensured there was no negative follow-through on Thursday and defended $8,800 over the weekend.
While a convincing break above $9,500 has remained elusive so far, the charts suggest the bulls have the stronger hand going forward.
The chart above shows that bitcoin is trading in a narrowing price range with higher lows and lower highs, forming a bull pennant pattern.
A bullish breakout would mean the rally from the low of $6,425 has resumed and could open the doors to $12,000 (target as per the measured height method – i.e. length of the flagpole added to breakout price).
While that target looks a little far-fetched, BTC could rally to $10,000 on confirmation of a bull-pennant breakout (4-hour close above pennant resistance of $9,400).
On the other hand, a downside break would add credence to last Wednesday’s bearish outside-day candle and could yield a pullback to $8,490 (38.2 percent Fibonacci retracement of the rally from $6,425 to $9,767.4).
That said, the odds of a bull-pennant breakout are high as indicated by the price action in the daily chart below…