Bitcoin price rally to $12K is meaningless until bulls flip it to support
Bitcoin price is near $12K again but this level may cause more harm than good if bulls fail to flip it to support.
On Tuesday Bitcoin (BTC) bulls mustered enough strength to push BTC price slightly above the $12K mark, a level not seen since Sept. 1.
The move occurred after Monday’s (Oct. 19) high volume surge to $11,822 was followed by continued buying into Tuesday, providing enough momentum for bulls to push above the ascending channel to $12,038.
The rally to $12K was also accompanied by soaring volumes across the top Bitcoin futures exchanges on Monday through Tuesday, and earlier this week Cointelegraph reported that the most recent CME commitment of traders report shows institutional longs reached a record-high.
At the start of the week traditional markets took a hit as investors feared a stalemate between Democrats and Republican lawmakers in Congress would prevent the passing of a second round of economic stimulus aimed at alleviating the financial pressure placed on small businesses and Americans in need of a second stimulus check.
Fortunately, by today’s market closure the Dow, S&P 500 and Nasdaq wrapped the day up with marginal gains.
Notably, the Dow closed 100 points higher after U.S. House Speaker, Nancy Pelosi said she felt “optomistic” about a deal being struck between the Congress and the White House.
Bitcoin’s recent price action has been somewhat dislodged from that of equities markets, leading some analysts on crypto Twitter to again call for a ‘decoupling’ but this all seems a bit premature.
Regardless where one stands on Bitcoin price decoupling from traditional markets, the digital asset remains one of the top performers for 2020, currently up 65.4% year-to-date.
Bitcoin bulls must flip $12K to support
Today’s daily high at $12,038 is only $10 away from the previous high on Sept.1 when Bitcoin price formed a tweezer top and corrected 18.5% over the next few days. So naturally, traders have expressed mixed emotions about the price hovering near $12,000 again, especially considering that the last 5 visits to this resistance were followed by sharp sell-offs.
Price action wise, when an ascending channel is trendline is broken near a key resistance level, it’s normal for some profit booking to take place, and this typically results in the price dropping to retest either the ascending channel trendline or a former resistance like $11,900 to determine whether or not buyers remain bullish enough to confirm the level as support.
On the 4-hr timeframe we can see that this is what has occurred as the price dropped to $11,850 as investors pulled in profits.
At the time of writing, BTC is trading around $11,940 and with less than 2-hours until the daily close, a push to secure $12,000 before the day ends would be a positive sign.
Given the recent importance of the $12K level, multiple failed attempts to overcome the resistance or a clear loss of momentum might motivate bearish traders to open short positions from $11,900-$12,000. This would heighten the possibility of a repeat of the previous sell-offs from 12K.
As mentioned in a previous analysis, Bitcoin price has support at the 20-MA ($11,600) and at the $11,500-$11,400 level. If the price were dip below the ascending channel midline, there is also support at $11,200 and $10,900.
Over the next day or so some consolidation in the $11,950 to $11,800 zone could lead to the formation of a bull flag or a pennant so traders should keep an eye on the 4-hour chart and volume across the 1-hour to 4-hour timeframe.
A push to the daily high ($12,038) would put the price back at a key resistance level (see dotted blue line) which if flipped to support would put Bitcoin price back on the path to securing a new 2020 high.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
