This is a daily technical analysis by Coindesk analyst and chartered market engineer Omkar Godbole.
Bitcoin (BTC) bullish advances have come across a zone of resistance above $88,000 marked at a critical level that could create or destroy continuous recovery rallies.
The first, perhaps most important level of a resistance cluster is a 200-day Simple Moving Average (SMA) of $88,356. SMA is widely regarded as a key indicator of long-term momentum. Earlier this month, Coinbase institutional analysts called the 200-day SMA downside break in March a potential sign of a potential crypto winter onset.
Thus, new moves above the 200-day SMA could be captured to represent a new bullish shift in momentum.
Such a move causes double breakouts as the top edge of the one-sided cloud is near the 200-day SMA. Movement above the clouds is said to reflect a bullish change in momentum.
Developed by Japanese journalists in the 1960s, this Hegishi Cloud is a technical analytical indicator that provides a comprehensive view of market momentum, support and resistance levels. The indicator consists of five rows. Reading Span A, Reading Span B, Conversion Line or Tenkan-Sen (T), Baseline or Kijun-Sen (k), and A Lagging Laging Price Line. The difference between the main spans A and B forms a side cloud.
The third final level forming the resistance cluster was a high of $88,804 on March 24th, from which the market was lower, returning to $75,000.
BTC Daily Chart. (tradingView/coindesk)
Makeup or break resistance zone?
The trading behavioral aspects come into play when assets approach the resistance zone, especially at key levels such as 200-day SMA and Ishima Cloud.
Prospect theory suggests that people are risk aversive in terms of seeking benefits and risk in terms of losses known as the “reflective effect.” So, as traders, people tend to avoid risks while locking up profits and open trades.
This trend is amplified when assets encounter key zones of resistance. Traders who have entered the Bitcoin market about $75,000 with the expectation of a rebound may feel pressured to make a profit as prices approach this resistance. Such sales could slow price increases or cause a new recession.
Conversely, if Bitcoin successfully breaks into the Resistance Zone, the fear of missing out will encourage more traders to make bullish bets, further boosting bullish momentum and increasing prices.
