Bitcoin is rallying. Is it sustainable or is it just another bull trap?

Bitcoin just surged back over $3900, which for bulls is fantastic.  But, how significant is the move technically?  Well, I’m about to show you.

bitcoin 1

This is the hourly chart of BTC/USD (each candlestick is an hour).  Note the big black line around $3800 – $3825.  There were multiple highs at that level which formed resistance.  So, from an hourly perspective BTC is very bullish.  Since we closed that hour well above the resistance zone, this is a classic breakout from a consolidation range.  The consolidation started on 9/23 and lasted a couple of days.

But, so what?  For this to be significant we need to go out in time and see if this move also breaks through technical barriers.

bitcoin 2

Yes, it is.  This is the 5-hour chart (each bar represents 5-hours of trading). The difference here is that we still haven’t closed this 5-hour period, so the signal is significant but it’s not confirmed.  For a trading signal to be confirmed we need the price to close above the resistance point.  Jumping the gun early can prove disastrous because the move may be a false one.

But, if BTC closes this bar (which started at 10am EST) then we have a breakout confirmed out to the 5-hour chart.

So, let’s go out further in time and see what else we can learn.

bitcoin 2

This is the daily chart of Bitcoin. Note that the current price is $3915 and there was a high from four days ago at $3906 (marked on the chart).  That is our target closing price for today.  Just like the 5-hour chart, if Bitcoin closes above that point today that would confirm that the market is ready to go higher, likely back towards the high from eight days ago ($4113.90 to be exact).

This is the way time interacts when reading charts to see how significant a particular move in the markets is or can be.  Even if Bitcoin doesn’t close today above $3906, because it busted through the highs from the previous three days that puts it in a good position to continue rallying for the rest of the week.  Closing above $3906 today would just increase the probability of a bigger move sooner.

This is an example of the kind of technical analysis and trade recommendations I give my Patrons at Patreon via the Private Blog for $4/month.  If any single trade idea pans out the service more than makes up the cost.

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