Bitcoin Holds $77K Support After Dip: More Consolidation Or Breakout Ahead?

With the market still nervously processing Fed Chair Warsh’s rather hawkish Jackson Hole speech on Friday, the Bitcoin price moved lower. Currently rebounding to $78K, is the $BTC price in for more consolidation as the market continues to digest its huge move up from the bottom?

$BTC price funnels into the end of the triangle - up or down?

Source: TradingView

The 4-hour chart shows that huge move up from $63K to $79,500 in the space of only five days. That was simply a monster move, and therefore the $BTC price needed to follow a sideways trajectory in order for the market to digest such a rally. 

So how long would the price be expected to go sideways before the next decisive move? As a rule of thumb, however high the rally goes, the sideways consolidation would go a similar distance, so if we took the height of the rally from the bottom and then laid that sideways, we would probably be at or near the end of this current period of consolidation. Obviously this is only a rough estimation, and where the price goes from here will either bear this thesis out or not.

Looking at the price action during this consolidation it can be seen that the $BTC price has possibly just avoided a head and shoulders pattern with this latest little move up. The price is being funnelled into the end of a triangle pattern and is holding the ascending trendline beneath. If the price pops out of the pattern to the upside, the $78,500 horizontal resistance is likely to become support, leaving the path relatively open for the $BTC price to potentially make a higher high and make a first contact with the key overhead resistance at $82K. If it’s to the downside,  support levels at $76K or $73K await.

Tough resistance and bearish divergence

Source: TradingView

The daily chart provides a very interesting view of what is happening in this medium to high term time frame. If we just look at the current price action we can see the towering green rally (the flagpole) and now what looks like a developing flag at its top. This is a bullish continuation pattern and would be expected to break to the upside.

However, if we extend the bottom trendline of the last bear flag right out, this runs just across the top of the most recent high and will act as resistance. Add to this the key horizontal resistance at $82K and above, and we are looking at a tough obstacle for the $BTC price to surmount. As things stand, unless the price can get up to and past this resistance, yet another lower high could be formed.

At the bottom of the chart, two key indicators may be trying to tell us something. The MACD and the RSI have both continued to trend up since May, whereas the price action may be following the bear market trend down. This is bearish divergence, and could really throw a spanner in the works for the bulls.

Therefore, it must be fully realised just how important it is for the $BTC price to get above $82,825. Failure to do so will probably lead to another more substantial dip.

Shooting star candle opposes RSI breakout

Source: TradingView

Zooming out into the weekly time frame could there be more reason for optimism? Possibly, but just as in the daily time frame, everything really hangs on whether the $BTC price can overcome the key resistance. 

The bearish factors for concern here are 1: that the price is still not able to hold above the $78,500 resistance level, and 2: a shooting star candle for last week gives notice of the top of a rally unless proved otherwise.

The two indicators previously mentioned do look better in this higher time frame. The MACD looks to be continuing a strong upward trend with the blue MACD line nicely above the red signal line. In the RSI, the breakout of the indicator line above the downtrend line has taken place. It now remains to be seen if the indicator line will confirm this break and trend change at the end of this week.

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.