Key Takeaways
- Bitcoin has hovered just below its record high in recent days as economic data has been encouraging and investor risk appetite has remained strong.
- The cryptocurrency’s price staged a decisive breakout above a flag pattern earlier this week, laying the groundwork for a new move higher.
- Investors should watch key overhead areas on Bitcoin’s chart around $112,000 and $137,000, while also monitoring important support levels near $107,000 and $100,000.
Bitcoin (
BTCUSD
) has rallied over the past week to approach the record high it set last month, tracking the strong performance of U.S. equities and encouraging signals about the U.S. economy.
The legacy cryptocurrency moved as high as $110,400 Wednesday morning after a closely watched inflation report showed that
consumer prices rose less than expected
last month, good news for investors who are hoping the Federal Reserve could be in a position to cut its benchmark interest rate this year. The price of bitcoin dropped to $108,800 recently, as
U.S. stocks backed off their earlier highs
as well.
Once a fringe financial asset dismissed by the mainstream, cryptocurrencies have gained new legitimacy this year thanks in part to the support of President Donald Trump and several allies in Congress. The price of bitcoin has also been supported by surging demand from publicly traded companies, such as Strategy (
MSTR
), that use proceeds from equity sales to purchase bitcoin for corporate treasuries. Meanwhile, total assets in
bitcoin exchange traded funds
have ballooned to $132 billion this month, up from $91 billion in early April, pointing to growing
institutional
interest in the cryptocurrency.
Bitcoin last hit a record high, of just under $112,000, on May 22. The digital currency has gained about 16% since the start of the year, far outpacing the performance of major stock indexes.
Below, we take a closer look at Bitcoin’s chart and apply
technical analysis
to identify key price levels worth watching out for.
Flag Pattern Breakout
After hitting its
all-time high
last month, bitcoin’s price consolidated within a
flag
, a chart pattern that indicates a continuation of the cryptocurrency’s
uptrend
that started in early April.
Indeed, the digital asset staged a decisive
breakout
above the pattern earlier this week, laying the groundwork for a new move higher. Meanwhile, the
relative strength index
confirms bullish price momentum, though the indicator remains below
overbought
levels, providing ample room for further upside.
In another win for bitcoin bulls, the
50-day moving average (MA)
crossed above the 200-day MA last month to form a bullish
golden cross
signal.
Let’s identify two key overhead areas to watch amid the potential for further buying and also locate
support levels
worth monitoring during
profit-taking
periods.
Key Overhead Areas to Watch
The first overhead area to watch sits around $112,000. This area on the chart will likely attract significant scrutiny near last month’s
peak
.
A move higher could see bitcoin rally toward $137,000. We projected this target by extracting the price bars comprising the cryptocurrency’s uptrend that preceded the flag and repositioning them from the pattern’s breakout area.
We selected this prior trend as it commenced following a breakout from a
pennant pattern
in late April, providing clues as to how the current breakout from a period of consolidation may unfold.
Important Support Levels Worth Monitoring
During profit-taking, investors should initially monitor the $107,000 level. A retest of the prominent December and January peaks may be necessary before the cryptocurrency makes a meaningful move higher.
Finally, a deeper
retracement
could see bitcoin’s price revisit the closely-watched $100,000 level. This area would likely provide support near the
psychological round number
and a trendline that connects a range of corresponding trading activity on the chart stretching back to last November.
The comments, opinions, and analyses expressed on Trixpointare for informational purposes only. Read our
warranty and liability disclaimer
for more info.
As of the date this article was written, the author does not own any of the above securities.
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