This is an important week for bitcoin.
The “King of Cryptocurrencies” has had a rough time lately.
The price of bitcoin peaked in November just above $65,000 per coin. Then, it dipped as low $35,000 last month.
Even for a volatile asset such as bitcoin, a 46% drop in two months is going to shake up a lot of traders.
But last week, bitcoin started to bounce…
And if it can continue higher this week, then there’s a good chance the “King” will be in the early stages of an intermediate-term rally phase.
Take a look at this chart…
The recent decline in bitcoin matches the duration and severity of the decline last summer (red dashed lines). Both downtrends lasted about three months, and both cut the price of bitcoin in half.
Bitcoin started a new rally phase last July when it rallied above all of its various moving averages, and when those moving averages flipped into a bullish formation – when the 9- and 20-day exponential moving averages (EMA – red and green lines) crossed above the 50-day moving average (MA – blue line).
Last week’s bounce in bitcoin was strong enough to propel the “King” above all of its various moving averages (blue circle).
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If that bounce continues this week, then the short-term moving averages will cross above the 50-day MA, and we’ll have the necessary conditions to signal the start of a new rally phase.
So, this setup looks bullish to me.
Traders can buy bitcoin right here, near $42,500 per coin, in anticipation of a run back towards its high above $65,000.
If bitcoin falls this week and dips below $41,000 – thereby losing the support of all of its moving averages – then traders can stop out of their position for a relatively small loss.
From a risk versus reward perspective, buying bitcoin right now looks like a good trade.
Best regards and good trading,
Jeff Clark
Reader Mailbag
Do you trade cryptocurrencies? If so, where do think bitcoin will go long term?
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