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Sentiment over bitcoin starting to turn positive
SINCE hitting a record high of 19,511, bitcoin has been in a freefall. The sentiment has been extremely dreadful with no signs of sustainable rallies. Bitcoin fell 70 per cent to the recent low of 5,791 in late June after it established a record high at 19,511 seven months ago. Nonetheless, it seems that the bulls are warming up once again to regain some market share.
From a longer-term perspective, there seemed to be a double bottom formation emerging at the 5,922 low. Remember, the initial sell-off from the 19,511 record high took bitcoin down to a low of 5,922 in early February. It took the market just two short months for it to tumble 69 per cent.
Since hitting that low in February, the price has been moving erratically with wild swings up and down. Four months later, the relentless selling pressure has once again brought the price down to the critical 5,922 February low. Clearly, with the benefit of hindsight, the bulls were ready to defend the 5,922 February low. Despite price breaking below the 5,922 in late June, the positive rejection at the end of the day reinforced the belief that the bulls are respecting the 5,922 low. In other words, the 5,922 February low could be the anchor floor moving forward where the long-term uptrend in bitcoin resumes.
Zooming into the recent price action also validates the bullish narrative. The consolidation since June has formed a bullish formation, Inverted Head and Shoulders pattern. Keep in mind that the formation of the Inverted Head and Shoulders pattern was firmly supported by the 5,922 February low confirming the strength of that support area.
With the recent news of BlackRock (the world's largest asset manager) setting up a team to look into cryptocurrencies and blockchains, the sentiment turned positive lately.
More importantly, the bulls succeeded in breaking above the 6,900 neckline on July 17, effectively triggering the Inverted Head and Shoulders pattern. As soon as the price broke above the 6,900 neckline, the bullish momentum accelerated and bitcoin was up 10 per cent on July 17, the day of the bullish breakout. Based on the Inverted Head and Shoulder projection, the bulls should be targeting the 8,000 area next.
Bear in mind that the long-term downtrend line since December 2017 has also been broken to the upside in July shown by the highlighted area suggesting that the long-term trend has turned bullish once again.
Therefore, from both the long-term and immediate view of the chart, bitcoin seems to have turned the tide and has returned back into the long-term uptrend.
The 5,922 February low could be the solid floor that launches bitcoin into the next wave higher. The next likely target on the upside will be the 8,000 resistance area based on the Inverted Head and Shoulders pattern projection. After which, price should be aiming for the 10,000 psychological round number.
- The writer is chief technical strategist, Phillip Securities Research.
Disclaimer: Chartpoint is provided by Phillip Securities Research for information only, and should not be construed as investment advice
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