Having witnessed a solid recovery from the low of $5,100 in the last 24 hours, bitcoin is once again trading on the front foot and looking northwards.

At press time, the bitcoin-US dollar (BTC/USD) exchange rate was roughly $5,700. As per CoinMarketCap, the cryptocurrency has gained 6.47 percent in the last 24 hours. Week-on-week, BTC is up 4.77 percent, and on a monthly basis, it is carrying 45.7 percent gains.

So, is the bitcoin price eyeing $6,000? Strong dip demand would seem to suggest so.

The drop to $5,100 witnessed yesterday turned out to be healthy correction as expected, and the subsequent ‘V’ shaped recovery could be taken as an indication cash is waiting on the sidelines for a good opportunity. Further, the potential (or perceived) benefits of holding bitcoin ahead of the hard fork in November could also bring in more buyers, leading to higher prices.

However, short-term overbought technical conditions persist. Therefore, the price action analysis suggests there is merit in being ‘cautiously bullish’ on bitcoin.

Daily chart

The above chart shows:

Wednesday’s candle was a ‘Dragonfly Doji.’

The relative strength index is still overbought.

Higher lows pattern (as indicated by a rising trend line & Wednesday’s sharp rebound from $5,100) is still intact.

View

‘Dragonfly Doji’ is candlestick pattern with a long lower shadow (also known as long wick or long tail or long leg) and without a real body and upper shadow. The long tail indicates dip demand, while the dragonfly doji indicates indecision among traders.

In this case, the price action on the following day generally decides the short-term outlook. The fact that bitcoin is well bid today indicates the bulls have been able to carry forward the strong move from the low of $5,100. Thus, prices may jump above $6,000 if the bid tone remains intact over the next few hours.

On the other hand, a negative price action today would confirm a bearish doji reversal. A bullish-to-bearish trend change is likely only below $5,000 (rising trend line support).

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