- Bitcoin has backed off 4 percent from three-week highs seen on Friday, but looks to have formed a bull flag – a bullish continuation pattern – on the 4-hour chart.
- A move above $3,630 would confirm a flag breakout and open the doors to $4,000 (target as per the measured move method).
- Acceptance below the lower edge of the flag, currently at $3,546 would weaken the short-term bullish case. That, however, looks unlikely, as the path of least resistance is to the higher side, according to Friday’s high-volume falling wedge breakout.
Bitcoin’s overnight pullback from three-week highs hit on Friday doesn’t mean the rally is over.
The cryptocurrency is currently trading at $3,560 on Bitstamp, having clocked a three-week high of $3,711 on Feb. 8. The 4 percent correction was preceded by repeated failures at the 50-day moving average (MA) resistance, currently at $3,633.
Even so, the prospects of a stronger short-term rally toward $4,000 look strong, as the price pullback has carved out a bull flag on the technical charts. That pattern represents a pause, which often ends up extending the preceding bullish move.
A break above the upper edge of the flag, currently at $3,630, would confirm a breakout and could be followed by a rally to $4,000 (length of the preceding bullish move added to the breakout price).
BTC’s move to highs above $3,700 on Friday confirmed a falling wedge breakout on the 4-hour chart. The short-term outlook, therefore, is bullish. Validating that positive development is a bull cross of the 50- and 100-candle moving averages.