Bitcoin (BTC) is solidly bid on the first trading day of the week, but a move above $10,000 could turn out to be a bull trap, the technical charts indicate.

Having hit a 3.5-week low of $8,371 on Friday, bitcoin prices traded in a sideways manner in the range of $8,400 to $9,400 over the weekend, according to CoinDesk’s Bitcoin Price Index. As of writing, BTC is seen at $9,885, and is up 13 percent in the last 24 hours, as per CoinMarketCap.

Despite the 14 percent recovery from Friday’s low of $8,371, it’s too early to call a bullish trend reversal, given that BTC is still down at least 18 percent from recent highs above $11,660.

Further, the price action over the weekend is indicative of short-term bear market exhaustion. For instance, on the Bitfinex exchange, bitcoin closed (as per UTC) below the 200-day moving average (MA) on Saturday for the first time since Feb. 5.

Daily chart

However, despite the bearish daily close, BTC avoided a break below Friday’s low of $8,342 and actually ended up creating a bullish “outside day” candle on Sunday. Prices also closed (as per UTC) above the 200-day MA.

A bullish outside day candle occurs when the candle has a higher high and a lower low than the previous day’s candle, indicating that the bulls have taken over from the bears.

Also, the symmetrical triangle breakout seen on the 1-hour chart below supports the idea of short-term bear market exhaustion.

1-hour chart

The above chart (prices as per Bitfinex) shows:

An upside break of the triangle pattern adds credence to the bullish outside day candle (seen on the daily chart) and indicates scope for a rally to $10,134 (10-day MA) and $10,371 (weekly 10-MA).

The 50-hour MA and 100-hour MA have bottomed out (shed bearish bias).

Over the last 14 hours, BTC seems to have formed a base around $9,400, possibly indicating the foundations of the next step higher towards $10,000 have been built.

However, the setup on the weekly chart indicates the rally to $10,000–$10,300 could turn out to be a bull trap.

Weekly chart

The above chart (prices as per Bitfinex)-

BTC created a bearish “outside-week” candle – i.e. last week’s high and low overshadowed the price action of the previous week – indicating the rally from the Feb. 6 low of $6,000 has ended at $11,700 and the bears have regained control.

The 10-week MA is trending lower, indicating bearish setup.

The relative strength index (RSI) failed to beat the resistance at 53.00–55.00 and has rolled over in favor of the bears.

View

The hourly chart favors a rally to $10,000–$10,300. A daily close (as per UTC) above the 10-day MA (seen today at $10,134) would confirm a bullish outside day reversal and open doors for re-test of $10,980–$11,000. However, the gains will likely be transient as suggested by the weekly chart.

Meanwhile, a break below last week’s low of $8,342 would open doors for re-test of monthly 50-MA, currently located at $6,339.

Only a weekly close above $11,700 would signal a bullish reversal and shift attention to $17,000.

Trap image via Shutterstock