Ten percent off, ten percent off. You see that nowhere else than in the bitcoin rate. Cryptocurrency is still a young market, and that is reflected in the price. Yesterday, bitcoin went under 6,000 euros for a while. Was that the real bottom?
Indicator heralded price increase
Just a look back to past days. The Relative Strength Index (RSI) is an indicator that indicates the momentum of the price. In the image below you can see the RSI on the bottom graph. You can use the RSI as an aid to determine the soil.
The Relative Strength Index (RSI) indicated that bitcoin was oversold, as the line is under the purple band. Oversold means that a lot of bitcoin has been sold in a short time. That can be a signal that the downward trend is over. More bitcoin is being purchased and that is driving up the price.
But there is something else. The bitcoin rate (top graph) makes lower bottoms. You can see that in the falling trend line. In the meantime, the RSI is making a rising movement. You call that difference divergence. And in this case that is a positive sign, the rate can recover.
That happened yesterday, in a day’s time bitcoin rose by more than ten percent!
Price can rise even further
We zoom in on the graph, each candle on the graph now represents one hour. You can see that the recovery went very quickly. Did you want to buy exactly at the bottom? Then yesterday you had to set your alarm clock at 7:00 am and have to buy exactly at that time. And then you now have a profit of more than thirteen percent.
At the moment, the rate seems to be an inverted head and shoulders. The shape of the formation is already in the name. You see two shoulders with a head in between, but then the other way around.
The green bar is the neckline. With an inverted head and shoulders, the neckline is the important resistance that must be broken. Does the bitcoin course break through the neckline? Then the price target is equal to the distance between the bottom and the neckline. That would mean that the rate goes to 7,500 euros.
And that increase is certainly welcome, because bitcoin has not been able to break out of a falling trend line in recent weeks. You can see that trend line in blue on the graph below. In addition, the green bar is also an important resistance in the longer term. At the end of October this was still a support, that seemed like the bottom.
Longer term still falling channel, last time in 2019?
We zoom out a bit on the graph. You are now looking at the bitcoin rate from October last year until now.
In our course analysis last Friday we wrote that light is shining at the end of the tunnel. The value of bitcoin moves between two trend lines that run down parallel. With an outbreak at the top we can look up again. Has bitcoin hit the bottom trend line for the last time? That gives more confidence for a renewed bull market.
RSI historically low, and that is positive
Now we combine these two graphs. You look at the bitcoin course at four-hour level and the RSI. The RSI has never been this low in over a year. If you are purely based on the RSI as an indicator, then the course must turn around.
Exactly a year ago, bitcoin had not yet found the soil. Bitcoin only just started its free fall towards 2,700 euros. Now the cards have been shuffled. The price has just tapped the bottom trend line. The road is now clear for a rise towards the top trend line.
Our expectations for the bitcoin course
Has the bottom for bitcoin really been found? Or is the price going even further down? Keep your head cool with our two farm-fresh scenarios.
If bitcoin rises from the inverted head and shoulders and from the blue trend line, the rate may rise to 7,800 euros in the coming weeks. That is the red resistance on the graph below. If the price also rises above that, the road is clear for a rise towards the top of this year, 12,200 euros.
But does bitcoin drop? Then the rate first finds support at the bottom of yesterday morning, 6,000 euros. If bitcoin also drops through that and the price at the bottom of the bull flag breaks out, then we find the first support at 5,400 euros.