Bitcoin (BTC) price just made a $1,200 rally towards $8,700, leaving bears and shorts behind. Several signals were pointing towards a potential trend shift and price reversal, while the overall market sentiment was still extreme fear.

Crypto market data. Source: Coin360

The majority of the market was looking for lower levels to buy and most often when the majority expects one thing, the opposite happens.

However, what were the reasons behind this latest push?

CME gaps closed and Bakkt volume kicks in

BTC/USD CME chart. Source: TradingView

Gaps on charts are often used by traders to define targets and trades. Approximately 90% of the time these gaps are closed before the market moves further. In the case of Bitcoin, the digital asset showed two CME gaps after the rally from $3,200 earlier this year. The first one was a gap between $8,500 and $9,000 and the second one was between $7,330 and $7,450.

The first gap closed by the breakdown of the descending triangle, while the second gap was closed by the dropdown a few days ago and closed to the dot. This leaves one open gap which is situated at the $11,800 level, way above the current price.

As noted in earlier articles, CME futures expiration dates often provide volatile days. Today was one of those days, and this is likely why BTC price made its move.

Interestingly enough, Bakkt futures provided a new all-time high, as 640 contracts were traded during on Oct. 23, 2019, an increase of 653% compared to the previous day. The next day, another 330 contracts traded.

These signals show that there's demand and interest at these levels for Bitcoin, as there's never been such a high level of volume on a day on Bakkt futures since the launch.

Bullish divergences suggest a bottom was in order

BTC/USD daily chart. Source: TradingView

On the daily timeframe, numerous potential bottom signals were shown for the first time since the top in June 2019. Bitcoin was able to hold an important support level at $7,400, which has been acting as support in June 2019 as well.

Alongside with the bounce, bullish divergences were building as Bitcoin price moved within a falling wedge structure. Bullish and bearish divergences generally mark a potential top and bottom forming in the chart. This phenomenon was observed during the December 2017 peak and the December 2018 bottom.

The chart is showing these bullish divergences for the first time on the daily time frame since the top in June 2019 and this provided an additional explanation of the massive rally that took place today.

Remarkably, the last dropdown brought Bitcoin price closer to the 0.618 Fibonacci level, which is an important level for Fibonacci and Elliott Wave traders.

Weekly chart back above the 100-week moving average

BTC/USD weekly chart. Source: TradingView

The weekly chart is also providing several bullish arguments after this dropdown. The 100-week moving average (WMA) was lost during the recent dropdown. However, Bitcoin gained it back during the most recent push.

The 100-WMA is an important indicator of market sentiment and confirmation of the direction of the market, as we can see in the history of the chart.

Going back to the start of the bull market in 2016, confirmation was needed on the 100-WMA before the price could continue rallying. This confirmation was given by a small “trap” below the 100-WMA but closed above it.

The same approach seems to be happening here, as Bitcoin clearly dropped below the 100-WMA and immediately bounced back up within the week.

Additionally, some sideways trading could occur after this before a new rally towards the halving begins. This could imply a potential target of $17,000-20,000 prior to the halving.

Total market cap at a critical level

Total Crypto Market Capitalization chart. Source: TradingView

The total cryptocurrency market capitalization (including Bitcoin) is at a critical level and potential support. Holding this area between $180-205 billion would be a massive support/resistance flip, considering the importance of this level.

The area is an order block from November 2017, prior to the big boom in December 2017. This level was a significant level during several bounces in Q3 and Q4 of 2018.

If the total market cap is able to claim this level as support now, the market is ready to aim for upper levels at $350 billion again and make another higher low, an essential indicator for upwards and bullish movements.

Good signals are given, as the price and market capitalization bounced significantly earlier today. Similar to the Bitcoin chart, this chart is also providing bullish divergences indicating a potential bottom forming.

Interesting enough, the last time the bullish divergences appeared was in the period of December 2018.

Key levels for BTC/USD

BTC USD daily chart. Source: TradingView

This bounce upwards can be stated as a bullish move, as the market bounced $1,200 upwards within one hour. However, for further bullish movements, Bitcoin still has to clear a few levels.

First of all, Bitcoin needs to close the weekly candle above the 100-WMA, which is considered an important indicator. The 100-WMA is currently resting at $7,800.

Additionally, the 200-Day moving average (DMA) and exponential moving average (EMA) are still moving above the current price levels. For more strength and a bullish outlook, the price of Bitcoin has to break above these daily moving averages. Currently, they are moving at $8,600 and $8,750.

Ultimately, the massive support at $9,200 has to be broken and flipped back to support, as Bitcoin will reclaim an important range then. If Bitcoin is able to get back in that range, we can conclude that Bitcoin made its bottom from the recent parabolic moves and is ready for further upwards continuation towards the halving event taking place sometime in May 2020.

The views and opinions expressed here are solely those of the CryptoMichael and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.