Bitcoin has been acting very strong in recent weeks, and this weekend, we already speculated on a likely new all-time price high for the week. Despite a slight pull-back yesterday, the buying pressure, helped by strong fundamental and technical factors alike, never eased.
Today, the most valuable coin surged past the $5000 level and never looked back, leaving investors and traders puzzled about the prospects of the current rally. Fundamentally speaking, everything favors Bitcoin now; analysts and investors widely favor the coin compared to altcoins, the hard fork fears have eased considerably and despite the bubble-talk, adoption is still on track. What does technical analysis tell us?
The Long-Term Setup
The technical picture is more interesting, as these explosive rallies are more driven by emotions than purely fundamentals. First looking at the long-term picture, BTC still has ways to go before reaching the overbought readings that recently led to deep, structural corrections. After the Chinese ICO-ban, the segment outright crashed and Bitcoin hit $3000, for a 40% correction.
BTC/USD Daily Chart Analysis (Bitstamp Prices)
Our trend model switched to bullish back on the 25th of September around the $3500 level, for an optimal entry. We then reiterated buy recommendations several times, last time on the 4th of October. While the current levels are definitely not the best for establishing new positions, the recent break-outs led to stellar extra gains, and given the fundamental background, holding onto a portion of your holdings is the way to go.
According to the Fibonacci extensions, $6000 looks like a feasible target for the coming weeks, and the $7000 level, the 100% extension is also possible although we wouldn’t bet the farm on that.
The Short-Term Picture
BTC/USD 4-Hour Chart Analysis (Bitstamp Prices)
The short-term momentum readings were already slightly overbought before the break-out, and a brief correction is very likely in the coming days. That said, given the favorable long-term setup we expect the move to continue with a likely test of the $6000 level.
Once again, this is not the best time to buy Bitcoin that is after a deep correction, but the trend is expected to remain intact and further gains are likely. Remember to always control risk and position sizes especially when trading with leverage.
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