Bitcoin made an upside break from the inverse head and shoulders pattern to confirm the reversal signal. However, price is stalling at the $7,600 level and might need to make a correction to gain more bullish energy.
Applying the Fibonacci retracement tool on the latest swing low and high shows that the 61.8% level coincides with the broken resistance around $6,800. This could be enough to keep losses in check as it lines up with a new rising trend line as well.
The 100 SMA recently crossed above the longer-term 200 SMA to confirm that the path of least resistance is to the upside. In other words, the uptrend is more likely to resume than to reverse. These moving averages are also near the rising trend line, adding another layer of support on a larger dip.
RSI is turning lower from the overbought region to signal that buyers might need to take a break from the recent rallies to book profits. Similarly stochastic has reached overbought levels and might be ready to turn south so bitcoin could follow suit.
The recent surge is being pinned on improved investor sentiment stemming from institutional interest, and of course FOMO among market participants. However, many still caution that this might merely be a short squeeze from earlier declines.
At the start of the quarter, bitcoin pulled up from its lows and some said that it was merely a dead-cat bounce. However, the sustained uptrend suggest otherwise. Besides, there have been a handful of positive developments in the crypto space that give these rallies legs.
Risk-taking is returning to the financial markets on easing trade war concerns, so traders appear to be ramping up their appetite for higher-yielding assets. This sentiment is also allowing bitcoin traders to look at regulatory developments in a positive light, acknowledging that these could support legitimacy and increase security in the industry.
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