Against expectations, bitcoin (BTC) defended support at $6,000 over the weekend, opening the doors for a stronger corrective rally above $6,480.
Friday's drop below $6,240 (bear flag breakdown) had created room for a drop to the June low of $5,755. Further, BTC closed below Thursday's low of $6,183 on Friday, signaling a continuation of the sell-off from the July 25 high of $8,507.
However, while the odds were stacked in favor of the bears, a break below $6,000 did not materialize. But it was close: the leading cryptocurrency printed a six-week low of $6,008 on Saturday, before rising to $6,500. At press time, price had moved a little lower to $6,450.
Looking ahead, the corrective rally could be extended further towards $6,850 if the bulls can overcome solid-looking resistance at $6,480, as seen in the chart below.
On the 4-hour chart, BTC is currently working hard to scale the trendline hurdle of $6,480.
A convincing break above that key resistance level would validate the bearish-to-bullish trend change signaled by a bullish relative strength index (RSI) divergence over the weekend, and could be a springboard on to a stronger rally toward $6,850.
That could still be a tough task, though, as the downward sloping (bearish) 50-candle moving average (MA) is currently located at $6,580, while the 100-candle MA is soon set to cross the 200-candle MA from above in favor of the bears.
As a result, a repeated failure to take out trendline resistance could shift focus back to bearish MAs and weaken the bull case.
BTC created an inverse head-and-shoulders-like pattern on the hourly chart over the weekend and cleared the neckline hurdle earlier today, adding credence to the bullish RSI divergence seen in the 4-hour chart.
The bullish breakout has opened up upside toward $6,850 (target as per the measured height method).
Disclosure: The author holds no cryptocurrency assets at the time of writing.
Bitcoin image via Shutterstock; Charts by Trading View
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