At pixel time 22:56 UTC+3, Bitcoin price is trading above the psychological $8,000 mark. Changing hands at $8,030, bulls are retesting an important resistance level—the 20-week Moving Average.
This has not gone unnoticed. One crypto trader is of the view that if bulls overcome H2 2019 liquidation pressure and breach the flexible resistance line, they will take charge and commandeer the next uptrend that could see BTC surge to $9,450.
On the flip side, if BTC is rejected at spot levels, odds are, prices may crater to $6,000—an equally important support level.
The significance of the 20-week Moving Average (MA)
Expressing his views of Twitter, the crypto analysts says the 20-week MA, a lagging technical indicator, is closely followed by chartists. When plotted in the weekly chart of the BTC/USD price, he notes that the indicator has “historically marked VERY important turning-points for Bitcoin, both bullish and bearish.”
By definition, a Moving Average is a technical indicator that smooth price action by averaging prices of an asset over a specific period. The 20-week Moving Average, in this example, averages the close of BTC weekly prices over 20 sessions.
“Bitcoin is currently testing the 20-week moving average. This moving average has historically marked VERY important turning-points for Bitcoin, both bullish and bearish. A rejection here could lead to a break below $6,000. If broken, BTC could reach $9,450 quickly!”
#Bitcoin is currently testing the 20-week moving average.
This moving average has historically marked VERY important turning-points for Bitcoin, both bullish and bearish.
A rejection here could lead to a break below $6,000. If broken, BTC could reach $9,450 quickly! pic.twitter.com/Ud0QCJBZLY
— The Moon (@themooncarl) January 8, 2020
Why the MA is important for Bitcoin Traders
As observed, the 20 week-MA is significant for technical analysts. During the crypto winter, it acted as resistance. It wasn’t until Q4 2018 that bulls built enough momentum and broke above the flexible resistance level.
In H1 2019, the moving average was an important support level. The bear breakout of late September 2019 ushered in a period of weakness that saw BTC drop to $6,500 in December.
Despite the revival in Bitcoin prices, caution should prevail. There is a sign of rejection. The result, at the time of writing, is a long upper wick—a sign of sell pressure in lower time frames.
For trend continuation in the second half of a rather eventful week, it is vital for bulls to edge past this resistance level and recoup the steep losses of mid-Nov 2019 in a three-bar bullish reversal pattern.
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