Bitcoin finally broke out of its descending wedge formation and surprisingly chose the upside route this time. This signals that further gains are in the works and possibly even a reversal from the slide.

There seems to be no apparent single catalyst for them, although some say that it might’ve been spurred by the anniversary of bitcoin hitting all-time highs this week. Others say it could be profit-taking leading up to the FOMC statement or funds being moved away from stock markets and onto alternative assets.

Still, the 100 SMA is below the longer-term 200 SMA on this 4-hour time frame to indicate that the path of least resistance is to the downside. In other words, the selloff is more likely to resume than to reverse. Then again, the price has already closed above the 100 SMA dynamic resistance as an early indication of bullish pressure.

The wedge formation spans $3,200 to around $4,800 so the resulting rally could be of at least the same height. The 200 SMA is located around the $4,100 level and might inspire some profit-taking, too.

RSI is already indicating overbought conditions or that bulls are exhausted and might be willing to let sellers take over. The oscillator has yet to turn lower to signal a pickup in selling pressure. Similarly stochastic is in the overbought territory as well.

This could trigger a brief pullback to the broken wedge top around the 100 SMA dynamic inflection point that might hold as support. Then again, there is a bit of consolidation going on that might be interpreted as a short-term continuation pattern.

Bitcoin might still need to be backed by an actual industry development before it could sustain any of these gains. If buyers are quick to book profits again, this could prove to be a mere retracement from the slide and encourage bears to hop in at better levels.

Images courtesy of TradingView