Bitcoin (BTC) remains on the hunt for $9,000, having established a bullish pattern at key price support in the last 24 hours.
The leading cryptocurrency by market capitalization is currently trading at $8,730 on Bitstamp, representing a 0.8 percent gain on the day. Prices hit a high of $8,785 earlier today.
Trading kicked off on a pessimistic note on Wednesday, with prices falling below the former resistance-turned-support of $8,500 (July 2018 high) in the Asian trading hours.
However, the drop to levels close to the May 16 high of $8,390 – also a former hurdle-turned-support – was short-lived and prices bounced back to $8,663 by UTC close, according to Bitstamp data.
Essentially, BTC established a bullish higher-low pattern in the key support zone yesterday, strengthening the bullish case put put forward by Sunday’s pennant breakout.
The path of least resistance, therefore, is to the higher side. Even so, buyers need to observe caution, as the cryptocurrency has already rallied more than 60 percent this month. Sudden price pullbacks are usually seen after such stellar rallies.
BTC witnessed a bull flag breakout – a continuation pattern known to accelerate the preceding bullish move – on the 4-hour chart earlier today, creating room for a rally to $9,940 (target as per the measured move method).
The pennant breakout confirmed on Sunday has already opened the doors to $10,000.
On the way higher, BTC may face resistance at $9,442 – the 38.2 percent Fibonacci retracement of the drop from the December 2017 high to December 2018 low.
It is worth noting that BTC created a doji candle with a long upper shadow – a sign of buyer exhaustion – in the four hours to 08:00 UTC, marking a weak follow-through to the bull flag breakout.
Should the doji candle’s high of $8,785 prove a tough nut to crack over the next few hours, a price pullback could be seen.
The case for a rise to $9,000, however, would weaken only if the newly established higher low at $8,420 is breached.
The daily trading volume bars continue to produce lower highs, contradicting the higher highs on price.
That bearish volume divergence takes the shine off the pennant breakout confirmed Sunday and indicates that the rally to $9,000 or above could be short-lived or may be preceded by a correction to $8,000.
Trading volumes need to pick up for a sustained move above $9,000.