Bitcoin could be in for a large reversal off its long-term slide as the price is forming an inverse head and shoulders pattern on the 4-hour time frame. Price has yet to test the neckline at $4,400 but a break above this could send it higher by the same height as the formation.
The 100 SMA recently crossed above the longer-term 200 SMA to confirm that the path of least resistance is to the upside. In other words, the reversal might be able to gain traction from here. The moving averages are currently holding as dynamic support but have yet to expand the gap to signal accelerating bullish momentum.
RSI is pointing higher also to confirm that buyers are regaining the upper hand. Stochastic is also moving up so Bitcoin might follow suit while bulls are in control. However, once both oscillators hit the overbought levels and turn lower, sellers could return and allow nearby resistance levels to keep gains in check.
Still, Bitcoin seems to be starting the year on an optimistic note and could be due for more gains in the days ahead. Traders are hoping to see more signs of institutional investment as more platforms are rolled out, likely supporting volumes and activity in the coming weeks.
Analysts are maintaining their bullish forecasts for the year, too, encouraging bulls to stay on or increase their positions before any big gains kick in. On the flip side, increased focus on regulation and other industry challenges might keep bulls cautious and quick about booking profits on nearby areas of interest.
It has been reported that demand for bitcoin in China might be poised to increase as a larger share of folks indicated interest in the space and have heard of digital assets in one form or another in the past year.
Images courtesy of TradingView