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With bitcoin gaining ground over the past week, this article sets out what we should watch out for, in the hope of ascertaining whether we have reached a bottom.
Bitcoin has been gaining ground at a rapid rate over recent weeks, with XBT/USD rising 60% over the past nine days. To many, this has brought bitcoin back into the limelight, with claims that we have seen a bottom. With valuations across the cryptocurrency space heavily discounted, there are many who will see this recent sustained ascent as a buying signal, thus raising confidence that we could see sentiment recover after an extended period of uncertainty. However, the charts show that we may not be out the woods quite yet, with a break through key resistance required to negate the two-month downtrend.
Looking at the daily chart, there is a clear downtrend in place. However, with the recent rebound pushing bitcoin through the middle Bollinger band, we are seeing a challenge that has not been seen in over a month. It is also notable that we are seeing the stochastic moving towards a bullish divergence, with a push through 65 providing a higher high, to point towards the possibility of a break higher in the price.
On the four-hour chart, there is a clear downtrend in play, and only a break above $11,773 would negate this. Until that happens, there is a chance we are setting another retracement, with the 76.4% retracement ($10,393) yet to be broken. The price has clearly been pushing onwards, with a rally through near-term trendline resistance highlighting the chance that near-term weakness will be temporary. A break below $8367 would be required to bring a more bearish outlook back into play. However, while we could see further short-term upside, this would only translate into a bullish wider view with a break above $11,773.
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