Now at $441, bitcoin is close to registering the highest weekly closing of 2015. As the cryptocurrency remains in the strong grip of the bulls, speculators are creating even more bullish positions. But have they pushed bitcoin in the danger zone? Is a correction in the offing? Let us try to predict that by conducting a technical analysis on the weekly BTC-USD price chart taken from the BITSTAMP exchange.
Bitcoin Chart Structure – As can be seen from the chart above, bitcoin is trading in a strong higher-top, higher-bottom structure. The cryptocurrency has breached the resistance trendline connecting the previous two peaks of 2015, and has retested it, stamping it as a strong support, and headed higher.
But, a matter of concern is the consistently flat volume. This presents a possibility that only a limited number of participants are pushing the price higher and bitcoin is struggling to attract new investment dollars.
Bollinger Bands – The cryptocurrency is currently trading above the upper range of the BB, which is an indication of overbought condition. This also signals that a reversal may be in the offing.
Moving Average Convergence Divergence – MACD has now touched a yearly high of 33.2039. Generally, when MACD trades near historical peaks or hits a new peak, it is seen as a contra bet and a sign of reversal.
Money Flow Index – The Money Flow Index shows a reading of 73.9271; readings at and above 80 represent overbought condition.
Relative Strength Index – Another metric flashing a red flag is RSI. The reading has shot up to the highest yearly level of 72.9691 and entered the overvalued territory.
While it is hard to say when the rally in bitcoin will peter out, but the technical conditions are certainly not favorable. Market participants should exercise caution when building fresh trading positions. Expect increased volatility in the coming weeks.