Right now things are looking moderately bullish for our favourite digital currency, but remember: this is a market, so there are no certainties. We see two possible scenarios playing out over the coming week or two, which will set the tone for what comes after that. Overall, analysts are still fairly divided over what bitcoin is up to and which direction it will go. (And that’s what you’d expect at this point in the cycle.)

Scenario 1

We’ve seen bitcoin resisting a triple bottom now, coming off the ~$6,000 zone three times since February. The first was a very high-volume bounce, the second and particularly third much lower volume recovery. This indicates that traders think anything sub-$6k is a good deal. The last few days bitcoin has tracked along just below the 50-day moving average, failing to break above it but clearly in a position to do so.

On the 4h chart, an inverse head and shoulders appears to be forming: a classic trend reversal indicator. Should this complete, it will carry the price north of $7,000 and probably back to around $7,500. Additionally, we’ve just seen a 50/200 MA cross on this timescale, which is again bullish, indicating shorter-term price action is picking up over longer-term bearishness. If this all plays out, as is entirely plausible, it lays a strong foundation for the next rally back above $8,000 and a continuation of the long-term bull trend. (One news item that may drive the fundamentals is a new ETF application – more on this later this week.)

Scenario 2

In the second scenario, bitcoin fails to cross resistance at $6,800, which is the neckline for the inverse head and shoulders. (It has once again faltered there yesterday.) Instead, it falls through the newly-crossed 50/200 MAs on the 4h and, most likely, back below the resistance that has been established in the $6,400 zone. At this point, we can expect a resumption of the downtrend and yet lower lows.

TL;DR Above $6,800 good. Below $6,400 bad.

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