It’s Happening: Bitcoin (BTC) breaks 8-Week Downtrend Resistance – Bull Run Back On?

After threatening to break out on Monday, Tuesday was the day when Bitcoin finally broke out of an 8-week downtrend. If the $BTC price can stay above the downtrend line on Wednesday, a daily confirmation of the breakout will have been achieved. Could this be a signal that the bull run is about to recommence?

Fed Chair Powell's comments are key

A further rate cut is due to be announced at the Federal Reserve FOMC meeting later today. Another 25 basis points rate cut fresh on the heels of quarter percentage point cuts in September and October is likely to grease the wheels of the economy and provide fertile ground for risk assets such as Bitcoin. 

However, it may not be all plain sailing for Wednesday’s FOMC meeting. Fed Chairman Powell will make some comments after the announcement, and if he has decided to deliver a more hawkish forecast on the possibility of rate cuts early next year, the market will probably not react well. Bitcoin is likely to see a fair bit of volatility before, during, and after Powell’s comments and his answers to questions from the press.

$BTC traverses within a bear flag

Source: TradingView

Viewing $BTC in the short-term time frame, it can be seen that the breakout is a good one so far. Of course, with potential high volatility to come, there is always the possibility that the price could be sucked back beneath the downtrend line. That said, this would probably only be a temporary move, if it happened at all.

The main pattern for the price now appears to be the ascending channel. The thing to keep in mind here is that this is a bear flag, no matter which way you look at it. Bear flags are obviously bearish, and most bear flag patterns break to the downside. 

However, with the $BTC price just having potentially broken out of a downtrend, and also out of a huge falling wedge pattern, the chances are good that this bear flag can be exited from the top rather than the bottom, which in itself would be an extremely bullish occurrence.

All this said, there is a pretty good chance that the $BTC price comes back down during the course of the day to test, and either confirm or reject, the breakout.

$BTC breaks out of a huge falling wedge

Source: TradingView

The daily time frame reveals the emergence of the $BTC price from the massive falling wedge pattern for the first time. This really can be the beginning of the upside move that takes $BTC all the way back to the upper major trendline and a new all-time high. 

Notwithstanding, there is still a way to go before the bulls can safely say that the downtrend is well and truly reversed. This would be all the way up at $107,500 where a higher high would be made. 

First things first, once all the FOMC jiggery-pokery is out of the way, the bulls need to break through the $94,000 horizontal resistance level, and the top of the bear flag. This would then leave the path open to the next big horizontal resistance at $101,000. 

Cross-up from the bottom for 2-week Stochastic RSI

Source: TradingView

The weekly chart is so bullish that it makes it difficult to understand the sheer amount of bearishness that pervades the market. The Fear and Greed Index is only just out of the Extreme Fear segment. Investors are in the main expecting the $BTC price to go lower. The chart is telling a different story.

It has to be acknowledged that yes, there is the possibility that this breakout can still become a fakeout by the end of the day on Wednesday. However, even if this happens, next week’s new candle is very likely to print on the other side of the downtrend line.

Also, one only has to look at the bottom of the chart to the Stochastic RSI. This is a 2-week chart, and for the blue fast line to be crossing above the red slow line, from the bottom, is of utmost importance. This occurrence only happens about once a year, and as can be seen in the chart above, it generally leads to a huge upside move. 

This is not the time to be following the herd on social media.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.