Analysis Bitcoin

BTC Price Tech Analysis for 05/01/2016 – Prime for a Breakout!

Sarah Jenn | January 5, 2016 | 6:15 am

BTC Price Tech Analysis for 05/01/2016 – Prime for a Breakout!

Sarah Jenn | January 5, 2016 | 6:15 am

Bitcoin Price Key Highlights

  • Bitcoin price is consolidating tightly on its 1-hour time frame, signaling that a strong breakout is ready to take place.
  • Price made higher lows and found resistance at $435, creating an ascending triangle pattern on the short-term chart.
  • Bitcoin is currently testing the top of the triangle and might be due for an upside break if it gives way or might be in for a selloff to the bottom if it holds as resistance.

Bitcoin price is still deciding which direction to take, although it is approaching the peak of the triangle and might need to break out soon.

Technical Indicators Signals

The oscillators such as RSI and stochastic are hinting that bearish pressure could come into play, as both indicators are moving lower. Stochastic came out of the overbought zone, indicating that buyers are still taking a break and letting sellers take control. Meanwhile RSI is nearing the overbought region and ready to indicate that buying pressure is fading.

On the other hand, the moving averages are showing that buyers might have enough energy for an upside break. After all, the short-term 100 SMA is above the longer-term 200 SMA, which means that the path of least resistance is to the upside.

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A breakout in either direction could yield gains or losses of around $30, which is roughly the same height as the triangle pattern. This means that a break above $435 could lead to a rally up to $465 and a break below the triangle support at $430 could bring bitcoin price down to $400.

Keep in mind that bitcoin price is coming off a downtrend so the triangle pattern looks like a bearish flag on the longer-term time frames. In addition, the US dollar is enjoying strong demand these days, buoyed by the latest Fed rate hike and the run in risk aversion.

Risk-Off Market Environment

The current risk-off market environment is favoring the safe-haven assets such as the US dollar for the time being, as the increased uncertainty in the global economy is leading investors to shy away from riskier and higher-yielding holdings such as bitcoin.

The latest slump in the Chinese stock market has triggered this flight to safety, along with escalating tensions between Saudi Arabia and Iran. The Chinese manufacturing PMI came in below expectations and reflected a sharper industry contraction, according to Caixin. In addition, the expiration of the ban on short-selling of securities by major stockholders could trigger another leg lower for Chinese and global equities later this week.

Potential catalysts for a breakout include the release of US jobs data this Friday, as another strong figure could revive rate hike expectations for the first quarter of the year and boost the US dollar across the board. On the other hand, downbeat results could force traders to push back tightening speculations for the second half of the year and spur a bit of dollar weakness, possibly pushing bitcoin price higher.

Intraday support level – $430

Intraday resistance level – $435

Technical Indicators Settings:

  • 100 SMA and 200 SMA
  • Stochastic  (8, 3, 3)
  • RSI (14)

Charts from Bitstamp, courtesy of TradingView

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