Bitcoin, Ethereum and Dogecoin are lagging the general market, but is there a weekend rise in the charts?
Bitcoin BTC/USD was trading slightly higher in Friday’s 24-hour trading session, lagging the broader market, which saw the S&P500 surging around 0.6%, many tech stocks soared after Impression of Positive Tesla Earnings.
The crypto sector had broken away from the general market recently, with Bitcoin, Ethereum ETH/USD and Dogecoin DOGE/USD trade mainly sideways.
The sideways consolidation is healthy and necessary as the relative strength indices of all three cryptos have reached overbought territory after massive price spikes, which began in late December. Continued sideways consolidation would help drive down the RSI levels of all three cryptos.
The RSI is a technical indicator used by traders to measure bullish and bearish price momentum. RSI levels can vary between 0 and 100, with levels between 30 and 70 generally considered healthy.
- When a stock’s RSI falls below the 30% level, it is considered oversold. When a stock enters oversold territory, it indicates that the price of the securities no longer reflects the true value of the asset, which may signal an upward reversal in the charts.
- When a stock’s RSI rises above the 70% zone, it is considered overbought. When a stock enters overbought territory, it signals that the stock price is high above its intrinsic value, which may signal a downward reversal on the horizon.
The RSI is best used when combined with other signals and patterns on a stock chart, as stocks can stay in oversold and overbought territory for an extended period of time before reversing.
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The Bitcoin chart: Bitcoin has been consolidating between around $22,298 and $23,824 since January 21. On Thursday and Friday, Bitcoin’s consolidation took place in the form of an inside double bar, with all the price action taking place within Wednesday’s 24-hour trading range.
On Wednesday and Friday, Bitcoin pulled back slightly to test the eight-day exponential moving average (EMA) as support and held above the level. The eight-day EMA had guided Bitcoin higher on January 6 and may continue to act as support.
If Bitcoin closed the trading session near its high price of the day, the crypto would print a hammer candlestick, which could indicate that higher prices will come on Saturday. If that happens, traders would like to see Bitcoin explode above Wednesday’s daily high on above-average volume, which could indicate that a longer-term run is on the horizon.
Bearish traders want to see Bitcoin break out of its sideways trading range, which could indicate that the current bull cycle is over and a downtrend will occur.
Bitcoin has upper resistance at $24,206 and $25,772 and lower support at $22,729 and $21,313.
Ethereum and Dogecoin Charts: Like Bitcoin, Ethereum and Dogecoin were trading sideways and Thursday and Friday formed inside double bar patterns. The sideways pattern of Ethereum was running between $1,500 and $1,680. Dogecoin had been consolidating between $0.077 and $0.093 since January 13.
Much like Bitcoin, Ethereum and Dogecoin mostly held above the eight-day EMA, which may continue to guide the cryptos higher. For short-term traders, a close below the eight-day EMA could be a solid exit strategy.
Ethereum and Dogecoin bulls want to see the cryptos break out of the horizontal pattern on above-average volume, while bears want to see Ethereum and Dogecoin drop lower from the January 18 low.
Ethereum has resistance above $1,717.41 and $1,957.24 and support below at $1,564.17 and $1,421.80.
Dogecoin has resistance above $0.091 and $0.099 and support below at $0.083 and $0.075.
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