Bitcoin (BTC) has run into a historical trend line resistance after an exuberant rally past the 21 Day EMA. This is likely to result in a sharp pullback back to the 21 Day EMA over the weekend. If the price holds that level, we can expect a head and shoulders pattern to complete and the next few weeks will see the price rising towards $6,000 or higher. However, if the price fails to defend the 21 Day EMA, we will see a retest of the yearly low or even a most anticipated fall towards $3,000. RSI for BTC/USD has now reached overbought territory on the daily time frame. The price has rallied hard the past few days and it is now due for a retracement even if it is short-lived.

The descending channel in which BTC/USD had been trading since it rose from February’s lows was breached in November when the price fell straight below it. This was the climax of the uncertainty and fear that prevailed in the market for the past eight months. Soon as the price broke below the descending channel, it went ahead to retest it around the end of November. It faced a strong rejection which set the ground for Bitcoin (BTC) to form a new yearly low around $3,200. The price has once again rallied from there to retest the descending channel that it broke below in November. As expected, the price has faced a strong resistance at this level. There is a strong probability that the price will retrace over the weekend to retest the 21 Day EMA.

The bulls are still scared as they were a few months back. This rally does not seem to have moved them as most expected. The daily chart for BTCUSDLongs tells us the whole story. The number of longs has now broken below the ascending channel and has declined aggressively. As the price of Bitcoin (BTC) rallied during the last three days forming three long green candles, the number of longs has fallen in the same way forming three long red candles in succession. This goes on to show that the price rallied when the bulls were not expecting it. The bears expected it because we saw a decline in the number of shorts at the same time.

It appears that the bullish resolve has been terribly weakened over the past few months. The prolonged bear market has made even long term investors in Bitcoin (BTC) pessimistic as to the future of the cryptocurrency market. This could be chalked up to profit taking considering a lot of people in the market at this stage are traders, not investors. However, the fact that BTCUSDLongs pierced through the 21 Day EMA support without even putting up a fight substantiates our view that the bulls are not ready to step up yet and that the price of Bitcoin (BTC) remains at the mercy of market makers for now.