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Key Indicator Turns Bullish as Bitcoin Struggles to Break Above $10K

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  • The three-day chart MACD’s first bullish turn in over three months could bode well for bitcoin’s price, according to historical data. The cryptocurrency may challenge 2019 high above $13,800 before the year’s end.
  • The immediate outlook, however, is bearish and prices could drop to $8,800 in the next day or two, with the daily chart reporting buyer exhaustion. Further, China’s state media has asked investors to avoid speculative behavior which could dampen trading.
  • A pennant breakout on the hourly chart could yield a re-test of recent highs above $10,000, although that looks unlikely.

A widely-tracked bitcoin (BTC) price indicator has turned bullish for the first time in over three months, hinting that a move to yearly highs lies ahead.

The moving average convergence divergence (MACD) histogram – an indicator used to identify trend reversals and trend strength – has crossed above zero on the three-day chart, confirming a bearish-to-bullish trend change. A positive reading was last observed in the first half of July.

Seasoned traders may argue that the MACD’s bullish turn cannot be trusted, as it is based on moving averages (MAs) which are lagging indicators.

While that sounds logical, the histogram has a strong track record of predicting trend changes and big moves, as seen in the chart below.

The MACD crossed above zero in late December 2018, confirming a bottom had been made near $3,100 and remained in the bullish territory throughout the first quarter, even though bitcoin’s recovery rally remained capped above $4,000.

The cryptocurrency broke into a bull market on April 2 with a convincing move above a bearish lower high of $4,236 created on Dec. 24.

The histogram fell below zero on Nov. 14 as prices breached the long-held support of $6,000. What followed was a sell-off to $3,100.

Going further back, the indicator’s bullish turn in Oct. 2017 was followed by a meteoric rise from $7,000 to $20,000. Meanwhile, a drop below zero in early January 2018 fueled a deeper slide in bitcoin’s price from $13,000 to $6,000.

So if history is a guide, the MACD’s latest bullish turn could see bitcoin breaking out of a four-month falling channel and challenging yearly highs above $13,800 before the year’s end.

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