Forcing a bitcoin (BTC) price breakout is looking anything but easy for the bulls, with the path to $7,400 being littered with resistance levels.
Stepping back, the leading cryptocurrency jumped above $6,800 on Monday, neutralizing the bearish view put forward by a downside break of a trendline support last Friday.
The sharp recovery from lows below $6,200 also adds credence to the argument that BTC has likely charted a long-term bottom around the 21-day exponential moving average (EMA). Moreover, the repeated defense of the area around $6,000 indicates sellers exhaustion. Hence, the stage looks set for a strong move to the upside.
However, securing a bearish-to-bullish trend change above $7,402 (Sept. 4 high) is going to be a tough task as BTC could encounter stiff resistance at following technical levels:
Trendline falling from July highs
BTC clocked a high of $6,810 on Monday, but closed (as per UTC) at $6,440, keeping intact the resistance of the trendline drawn between the July 25 and Sept. 5 highs.
At press time, the cryptocurrency is trading around the trendline resistance of $6,430 on Coinbase. A high-volume close above that level would open the doors to the next resistance level lined up above $6,800.
Horizontal line from Sept. 22 high of $6,823
BTC’s failure to hold above $6,823 on Monday has established that level as a key near-term resistance. In any case, it is a key horizontal hurdle, as seen in the chart above.
It is worth noting that trendlines (diagonals) are subjective, meaning the connecting points tend to differ from person to person. On the other hand, key high and lows (horizontals) are objective and hence $6,823 qualifies as a key price hurdle.
Trendline from March highs
The trendline connecting March highs and July highs is currently located at $7,020 and could cap upside in BTC.
The longer the duration of the trendline, the more validity attached to the support or resistance level represented by it.
Hence, the prospects of a bull breakout above $7,400 would rise sharply if BTC manages to clear this eight-month-long falling trendline on the back of strong volumes.
BTC seems to have carved out a bottom around the 21-day EMA, although a bullish breakout is $1,000 away.
A break above the trendline sloping downwards from March highs could be considered an early sign of impending bullish reversal above $7,402 (Sept. 4 high).
On the downside, 21-month EMA of $6,123 is the level to beat for the bears.
Disclosure: The author holds no cryptocurrency assets at the time of writing.
Bitcoin image via Shutterstock; charts by Trading View