The Bitcoin price reached a low of $6441 before initiating a strong bounce and reaching $7400. The bounce occurred right at the support line of the descending channel. However, the lack of volume and failure to close above the previously significant resistance areas makes us believe that the price will eventually drop below $7000.
Bitcoin Price Highlights
- The Bitcoin price bounced on the support line of the channel.
- It broke out above a long-term descending resistance line.
- The price is following a short-term descending resistance line.
- The weekly outlook is undecided.
The Bitcoin price made a low of $6441, bouncing at the support line before creating a massive bullish engulfing candlestick and moving upward. We have slightly adjusted the support line to account for the recent movement.
However, the candlestick did not have a significant volume for a candle of that size.
There are two divergences present in the RSI, both in the long and shorter term. While this suggests an upward move should soon occur, we could see the Bitcoin price again drop below $7000.
Additionally, this movement caused the price to break out from a descending resistance line that had been in place since October 25. The Bitcoin price is in the process of validating the line as support, a common movement after breakouts.
However, the Bitcoin price is still trading below both the 50- and 100-day moving averages (MA), and the resistance area at $7700-$7800. Therefore, the current upward move should still be considered a retracement rather than the beginning of a new upward cycle.
As suggested yesterday, the weekly outlook has almost turned bullish. The recent bounce caused a long lower wick and a bullish doji is in the process of being created. However, the Bitcoin price is still facing resistance from the 50- and 100-week MAs and the previous breakdown level.
A weekly close above $7600 would indicate that the bottom is in and that the Bitcoin price will continue upwards. We do not think that will occur this week.
Looking at the short-term movement, we can see another descending resistance line in place since November 18 that is still intact.
Also, the Bitcoin price has made a double bottom near $6600, combined with a long lower wick each time.
In relation to the descending channel and the longer-term descending resistance line, the Bitcoin price could still go below $7000 and not fall below the line.
That type of movement would cause the Bitcoin price to increase and then fall towards the end of December, possibly validating both the recently broken descending resistance line and the support line of the channel below $6500.
To conclude, the Bitcoin price initiated a relief rally that caused the price to go above $7000. However, it has yet to move above a significant resistance, making it likely that the current move is still a retracement rather than the beginning of a new cycle.
Good luck and happy trading! For our previous analysis, click here.
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Source: Be In Crypto