Bitcoin has shrugged off news of a regulatory clampdown in China by surging 24% from its recent low, but a sustained recovery may yet be delayed by heavy technical resistance in the $34-37K range.
The world’s leading cryptocurrency plunged to a five-month low of $28,600 on the Bitstamp exchange on June 22, before rallying to $35,517 three days later.
Its recovery was halted by a downward sloping trendline that has now rejected price to the downside on six occasions since mid-May. Trendlines act as support and resistance levels once widely recognized by traders, creating either a floor for price-action recovery or a ceiling for downward momentum to resume.
The strength of a level typically increases with the number of touches and rejections.
A false breakout occurred on June 13-18, when price rallied to the recent high of $41,341 before sinking back down below the trendline.
The failure of the trendline to become a support level after the initial crossover will have emboldened bears, who then pushed bitcoin to its June 22 low amid news of hawkish sentiment at the US Federal Reserve coupled with a ban on bitcoin mining in China.
The rejection also occurred around the 200 exponential moving average on both the 4hr chart and the daily chart–a rare synchronicity across timeframes that will only have amplified the resistance.
At the time of writing, bitcoin was trading around $33,000 after hitting short-term resistance at the 50 exponential moving average on the 4hr chart.
A move above that level will bring three bands of resistance into play on the same chart: the trendline (currently $34,600); the 144 exponential moving average ($35,700); and the 200 exponential moving average ($37,000). The two moving averages are broadly parallel and declining at a rate of about $300 per day.
Success on all fronts would pave the way for a rapid rise to $41,000, which has marked a local top twice since May.
Traders will meanwhile be keeping a close eye on the higher-timeframe monthly chart, which opened in June at $36,893, according to British financial derivatives trading platform IG.
A close on Wednesday above or near the opening price for the month would give rise to a long-tailed candle–widely considered a bullish signal because it indicates that the market has tried and failed to hold lower levels.
This scenario would also involve price moving back above the 10-month exponential moving average, raising hopes that the down trend in force since April has come to an end.