Bitcoin (BTC) needs to overcome a key technical resistance to keep the short-term bull market going, technical studies indicate.
The leading cryptocurrency rose to $6,785 on Bitfinex on Wednesday - the highest level since June 22 - and looked set to test the psychological hurdle of $7,000, as suggested by Monday's bullish breakout.
However, the bulls failed to muster enough momentum to cross $6,754 (23.6 percent Fibonacci retracement of the drop from $9,990 to $5,755) on a daily closing basis (as per UTC), establishing the Fibonacci level as a stiff resistance.
Further, a detailed look at the technical charts reveals the area around $6,754 is packed with moving average lines and Bollinger Band, all working in unison to put brakes on BTC price rally.
Hence, a convincing break above the resistance needs to happen soon, else a price pullback could be in the offing.
At press time, BTC is changing hands at $6,620 on Bitfinex.
The above chart shows:
The upper Bollinger Band (standard deviation of +2,2 on 20-candle moving average) is located at $6,570, the 200-candle moving average (MA) is seen at $6,717, and the 23.6 percent Fibonacci retracement is located at $6,754.
Bollinger Bands are sloping upwards in favor of the bulls.
BTC is trading above 50-candle MA and 100-candle MA and both MAs are trending north (biased to the bulls).
The cryptocurrency has created a rising channel-like structure. (bullish setup).
Clearly, the odds are stacked in favor of a convincing move above the resistance zone of $6,717-$6,770. The bullish setup in the daily chart also favors a rally to $7,000.
However, if BTC fails to pick up a bid in the next few hours, the focus will likely shift to the bearish price-relative strength index (RSI) divergence seen in the 4-hour chart. In this case, the rising channel could be breached to the downside, triggering a deeper pullback in BTC prices.