Bitcoin (BTC) remains on the hunt for a major bullish breakout after bouncing back from an overnight dip.

Prices hit a four-day low of $7,823 yesterday reportedly due to whale dumping over $50 million-worth of the cryptocurrency in one Bitfinex trade. The news that New York’s attorney general is taking a closer look at major cryptocurrency exchanges operating in the state may also have dampened the bull mood.

The sudden price drop raised the possibility that the rally from the April 1 low of $6,425 had run out of steam.

However, BTC’s sharp return from $7,873 to $8,160 this morning established the area around $7,800 as a strong support level and indicates a strong dip-demand mentality in the market. For the second time in the last three days, a dip below the $8,000 mark was quickly undone.

The recovery witnessed this morning adds credence to the bullish moving average studies.

As of writing, BTC is trading at $8,090 on Bitfinex – largely unchanged on a 24-hour basis.

4-hour chart

The bullish crossover between the 50-day moving average (MA) and the 200-day MA favors the bulls. Note that BTC has also cut through the descending trendline.

More importantly, the recovery from the low of $7,823 to $8,168 signals a bearish pattern failure – that is, BTC witnessed a head-and-shoulders breakdown (bearish reversal) yesterday, seemingly signaling the rally from $6,815 had ended, however, there was no bearish follow-through.

The price action indicates that bitcoin could challenge the resistance zone of $8,350–$8,420 seen in the daily chart below.

Daily chart

The descending trendline resistance has sloped lower to $8,350, while the 50-day MA has shifted lower to $8,416.

The 10-day MA continues to slope upwards in favor of the bulls and is currently seen at $7,674.

View

BTC will likely test supply around $8,400 in the next 24 hours. A high volume close (as per UTC) above that level would signal a long-term bearish-to-bullish trend change.

On the downside, $7,870 (today’s low) is the key level to watch out for. BTC’s failure to defend the key support level could yield a pullback to $7,510 (former resistance turned support).

Only a daily close below the ascending (bullish biased) 10-day MA would indicate the rally from the low of $6,425 has ended.

Bull image via Shutterstock