Above $4,300: Bitcoin Is Up, But Is It Out of the Woods?

 

The bitcoin-US dollar (BTC/USD)  exchange rate is gaining altitude after the bearish Doji reversal seen  earlier this week failed to keep the cryptocurrency below its 50-day  moving average. At press time, bitcoin is trading at $4,325; up 1.46 percent as per  data from CoinMarketCap. The two-day sell-off ran out of steam earlier  today at the low of $4,150. The subsequent rebound then gathered pace  above the 50-day moving average of $4,187. However, the rebound from the 50-day moving average support seen in  the one hour indicates the fears over the event are overblown. So, is  bitcoin set to fly high or is the rally a bull trap? The price action analysis suggests the cryptocurrency is currently hovering in the no man's land. 

 

Daily chart

 A solid rally from the 50-day moving average support, though  encouraging, is not enough. BTC needs to take the rising trend line, in  which case the odds of a rally to $4,700 levels would improve  significantly. 

 

4-hour chart

 Golden crossover  was confirmed on Tuesday. Rally from the low of $4,150 to  $4,325 adds credence to the argument that moving average crossovers tend  to work after a time lag. 

Bearish Scenario - Potential Head and Shoulders

 But while there's reason for optimism, bitcoin is not out of the  woods yet. Investors need to watch out for a failure at the resistance  offered by the rising trend line as it could lead to a head and  shoulders pattern. Head and shoulders formation consists of a left shoulder, a head, and  a right shoulder and a line drawn as the neckline. A break below the  neckline indicates a bearish trend reversal. 

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• An end of the day close above the rising trend line would open doors for a rally to $4,700
• Meanwhile, a failure to take the rising trend line followed by a  break below the head and shoulders neckline support of $4,170 would open  up downside towards $3,870.