Bitcoin’s Friday Rally Bolstered Technical Setup, Fundstrat Says
(Bloomberg) -- Bitcoin is holding onto its big jump from Friday, a move which may have significantly changed its technical setup, according to Fundstrat.
The largest cryptocurrency jumped by about $2,500 within a matter of minutes on Friday and has been trading around $48,000 for most of the weekend, having spent more than a week before that in the lower $40,000s. The overall crypto market went from a market value of about $1.9 trillion on Wednesday to $2.2 trillion on Sunday, according to CoinGecko.
The breakout “looks important technically,” strategists at Fundstrat, the firm co-founded by Tom Lee, wrote in a report. “Prices have eclipsed weekly highs as well as one-month downtrends,” they said. While trends had turned negative a month ago, “Friday’s move is a big positive in helping to resolve this consolidation.”
The quick jump may have been fueled by a short squeeze in parts of the market, according to JST Capital co-founder Todd Morakis and Jonathan Cheesman, head of over-the-counter and institutional sales at crypto-derivatives exchange FTX. Market watchers pinned it on everything from the end of the historically tough month of September to lack of interference from the Federal Reserve. As is usually the case when Bitcoin takes a step higher, bulls cheered the move.
But some who say the gains improved the overall setup still think the status quo hasn’t changed.
“Just a week after China’s announcement making crypto transactions illegal and its associate $4,500 loss on the week, Bitcoin rebounded sharply last week as my expected support level in the low-$40,000s held,” said Rick Bensignor, president of Bensignor Investment Strategies and a former strategist at Morgan Stanley. “This remains in the low-$40,000s to low-$50,000s trading range I had called for in early August.”
And Fairlead Strategies LLC’s Katie Stockton is sounding a note of caution about just how far the gains can go.
“The rally has also preserved positive intermediate-term momentum” via a technical measure known as the moving average convergence/divergence indicator, Stockton said in a note -- but she sees a counter-trend signal coming from another technical framework, DeMark indicators, that could prevent follow-through on the move.
“We would feel more comfortable moving to a bullish short-term bias once this signal is invalidated -- which in our work would require two closes above $48,800,” she said.
Bitcoin hasn’t closed above $48,800 since Sept. 6.
Still, Fundstrat is taking the bullish side of things, and looking upward for its next key levels.
“The first upside target lies at September highs at $52,956, then $64,895,” the strategists said, the latter being right around Bitcoin’s record high from mid-April.
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