Bitcoin surged by over 10 percent on Wednesday the biggest single-day gain since Oct. 25, according to CoinDesks Bitcoin Price Index.<\/p>\n
Notably, prices had slumped to seven-month lows below $6,500 around lunchtime (UTC), but the breakdown was quickly undone and the cryptocurrency was trading above $7,400 before midnight.<\/p>\n
The rebound from multi-month lows is a tell-tale sign of seller exhaustion especially, as it erased the losses seen in the preceding eight days.<\/p>\n
Wednesdays spike has neutralized the immediate bearish case. That said, a bullish reversal would be confirmed only if and when prices rise above the Nov. 29 high of $7,870. That would invalidate the most basic of all bearish patterns a lower-highs setup.<\/p>\n
With bitcoin currently trading at $7,170, the bull reversal is still $770 away.<\/p>\n
Bitcoin has charted (price via Bitstamp) a series of lower highs (arrows) and lowers lows over the last five months.<\/p>\n
The last lower high at $7,870 was printed on Nov. 29 and is still intact. A UTC close above that level is needed to confirm a short-term bearish-to-bullish trend change, as noted above.<\/p>\n
A move above that level shouldn't be ruled out, as the 14-day relative strength index (RSI) has diverged in favor of the bulls. A bullish divergence occurs when an indicator prints higher lows, contradicting lower lows on price, and is considered an early warning of an impending corrective bounce.<\/p>\n
Additionally, Wednesdays big bullish engulfing candle is indicating seller exhaustion and would gain credence if prices find acceptance above $7,450 (the candle's high) in the next 24 hours. That would further strengthen the case for a test of resistance at $7,870.<\/p>\n
Both patterns would be invalidated if prices drop below $6,428, although that looks unlikely at press time.<\/p>\n
The overall outlook would turn bullish if and when the falling channel on the weekly chart is breached to the higher side. Currently, the channel resistance is located at $8,463.<\/p>\n
Disclosure: The author currently holds no digital assets.<\/p>\n
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