Bitcoin (BTC) sank to a new 2018 low this past weekend but came sprinting out of the gates this morning to kick off the week.
Closing at a new 2018 low of $3,134 this past Saturday, Bitcoin was looking ready to tumble straight back to $3,000. The virtual currency king found a little fight within, however, and blasted off from $3,220 to $3,450 in less than two hours.
Is this a signal that Bitcoin will finally see some decent gains this week — or is it yet another bull trap poised to pull the market back down?
Relative Strength Index (RSI)
Taking a look at Bitcoin’s (BTC) relative strength index (RSI), it appears as though BTC is about to test the resistance to make a double top at 36.
There is a good chance that after the pump this morning and resistance on the horizon, that BTC will soon need to cool off a bit and may head back for a second test of the 30 bottom.
Analyzing Bitcoin movement with the Ichimoku Cloud indicator shows that BTC was able to slightly pierce the cloud during the initial pump this morning.
Historically, the bottom of the cloud has acted as heavy resistance against the price movement, as seen on Nov 29 and Dec 1 of this year. At the time of writing Bitcoin is sitting flush with the Kijun-Sen line, which has also predominately acted as resistance in Q4.
This could validate the RSI and signal a strong sell-off in the near future.
Big Bull Trap?
Since hitting a new 2018 low, Bitcoin has made a strong bounce off of the descending channel support and was able to return back to the peaks of the shoulders in the previous cycle (green line).
It has yet to be seen if the bulls have enough power to carry the price past the shoulder level to the head and descending resistance around $3,580 to $3,600.
If the bulls surrender, there is a possibility of falling back as quick as we climbed earlier to test another low, most likely in the neighborhood of $3,000.
Traders should be extra cautious at entering positions at these levels. Coming off the heels of a seven percent pump and hitting resistance levels is likely to cause some pushback before anymore upward movement can happen.
Has Bitcoin (BTC) finally reversed after hitting bottom? Do you think Bitcoin will continue to put in lows before the end of 2018? Let us know your thoughts in the comments below!
Images courtesy of TradingView.
Disclaimer: The contents of this article are not intended as financial advice, and should not be taken as such. BeInCrypto and the author are not responsible for any financial gains or losses made after reading this article. Readers are always encouraged to do their own research before investing in cryptocurrency, as the market is particularly volatile. The author of this article does hold BTC.