However, the price has stalled around the breakout level, raising concerns for the possibility that the breakout was not legitimate and the price will soon reverse its trend.
Bitcoin Channel Breakout
The Bitcoin price had been trading inside a descending channel since it reached a high on June 1. Yesterday, the price broke out from the resistance line of this channel after two previous unsuccessful attempts.
The price created a bullish engulfing candlestick and reached a daily close above the resistance line of this channel with above-average volume.
Currently, the $9,300 area is offering strong support. It is both a previous support area, that briefly turned to resistance before the price reclaimed it on July 6 along with the 50-day MA, which has been offering support throughout this entire move.
However, if we step away from the channel, the bullishness is not as clear as the daily chart makes it appear.
First, the price initially moved above the 0.618 Fib level of the previous decrease, but proceeded to fall back below it shortly after, suggesting that the higher prices could not be sustained.
Next, there is a hidden bearish divergence measuring from the June 22 high, in which the price reached a lower-high but the RSI created a higher-high.
However, volume was extremely significant during the most recent bullish candlestick, so there are mixed signals as to whether the current trend is bullish or bearish, even though the breakout makes a bullish bias more likely.
In the short-term, we can see that the price has been following an ascending support line since July 6, which is supported by the 50-hour moving average (MA). The increased volume during this move is more clearly visible using the hourly time-frame.
However, the RSI has generated considerable bearish divergence, a sign of weakness. Furthermore, the price has lost the support of the minor $9,420 support area, which is now acting as resistance.
The current support line can be helpful in determining whether the current trend is bullish or bearish.
A breakdown below this support line could indicate that the long-term breakout could not be sustained, a possibility that would be further strengthened by a loss of the $9,300 area.
If the ascending support line holds, BTC could continue increasing towards the range high.
To conclude, the Bitcoin price has broken out from a long-term descending channel. However, the initiation of the upward trend has yet to be confirmed, and it would be invalidated by a decrease below $9,300.
For our previous analysis, click here.
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