The “King of Cryptocurrencies” is set up for a rally.
Bitcoin has been falling hard for the past three weeks. But lately it’s been showing some strength.
And that strength has created a potentially bullish setup on the daily chart…
Take a look at this bitcoin to U.S. dollar chart…
The chart shows an “ascending triangle” pattern (dotted red lines). It’s a bullish pattern that can often lead to an explosive move higher.
Bitcoin broke out to the upside of the pattern last month. But it was a false move (a fake out), and the “King” quickly fell back inside the pattern.
Last week, bitcoin tested the support line of the ascending triangle. Support held, and bitcoin bounced. Now, it looks like bitcoin is in a better position to stage a breakout.
The support and resistance lines of the triangle are now closer together, which increases the likelihood of a sustained breakout.
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All the various moving averages are coiled together near the $42,000 level. Energy is building… And bitcoin is currently trading inside the cluster of its moving averages.
If bitcoin can rally above its 50-day moving average (MA – blue line) at $42,136, then it’s likely headed toward the resistance line of the triangle near $45,000. And if bitcoin can rally above resistance, then the pattern suggests a rally back up to the December high near $51,000.
Of course, nothing is guaranteed here. Bitcoin could break down from the pattern by dropping below the support line at $39,000. In that case, the “King of Cryptos” will likely be headed toward $35,000.
But I like the idea of owning bitcoin here. Traders can buy it near $42,000 and keep a stop at $39,000 – risking $3,000 per coin.
On the other hand, if bitcoin breaks out to the upside it could run to $51,000. That would be a $9,000 gain. From a risk/reward perspective, we’re risking $3 to make $9.
That seems like a good setup in my book.
Best regards and good trading,
Jeff Clark
Reader Mailbag
In today’s mailbag, Delta Report member Thiago shares his thoughts on Jeff’s recent Open Line Q&A session [subscribers can access that here]…
I’m a new trader with no experience. I watched the Q&A, and it helped me understand how options work more clearly. I really enjoy Jeff’s Delta Report. You’re an excellent professor!
– Thiago T.
Let us know your thoughts – and any questions you have – at feedback@jeffclarktrader.com.