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Bitcoin logged gains in the three days to July 20, snapping the longest losing streak on the three-day chart since December.
The bias, however, is still bearish with prices holding below $11,080 (as per Bitstamp).
Key indicators on short-duration charts are biased for a fall back below $10,000.
A 4-hour close above $11,080 would activate twin bullish cues and could yield a rally to $12,000.
A weekly close (Sunday, UTC) or consecutive daily close above $12,000 is needed to confirm a continuation of the bull market.
Bitcoin (BTC) ended its longest losing streak in seven months over the weekend, but the outlook still remains bearish.
The top cryptocurrency by market capitalization eked out 10.83 percent gains in the three days to July 20, confirming a green candle on the three-day chart.
The green candle notably formed following three consecutive red candles, representing bitcoin’s longest losing streak since the end of December, according to Bitstamp data.
Back then, BTC had created four straight read candles, as seen in the chart below.
Losing streak snapped
As seen above, bitcoin’s recovery rally from the bear market low of $3,122 on Dec. 15 ended with a four-candle losing streak, which saw prices create a bearish lower high at $4,236 and drop by 15 percent to $3,560.
The resistance created at $4,236 remained intact for more than three months before bitcoin breached that on the back of higher volumes on April 2, confirming a long term bearish-to-bullish trend change.
What followed was a solid rise to $13,880 by June 24. Essentially, BTC more than tripled in value in six months to June 24 and was looking overbought at the start of the current month.
Therefore, the latest three-candle losing streak likely marked a healthy correction of the bull market, as noted by popular technical and fundamental analyst Alex Kruger.
While the losing trend has ended, the correction phase may not be over yet, as the cryptocurrency is yet to violate the bearish lower-highs pattern with a move above $11,080, as noted on Friday.
As of writing, BTC is changing hands at $10,460 on Bitstamp – down 1.47 percent on a 24-hour basis.
Bitcoin clocked a high of $11,120 on Saturday, but failed to close above $11,080 and fell back to $10,300, leaving intact the bearish lower highs pattern created during the sell-off from $13,200 to $9,049.
The moving average convergence divergence histogram has crossed below zero, signaling a bullish-to-bearish trend change, meaning the bounce from the July 17 low of $9,049 has ended and prices may fall back below $10,000 over the next 24 hours.
Supporting the bearish case is the below 50-print on the relative strength index.
Bitcoin, however, may rise to $12,000 this week if prices break above $11,080, activating twin bullish cues: invalidation of lower highs and an inverse head-and-shoulders breakout (above right).
The neckline resistance of a potential inverse head-and-shoulders pattern is currently located at $11,130.
On the weekly chart, $12,000 is the level to beat for the bulls.
A convincing weekly close on Sunday (UTC), or a back-to-back daily close above $12,000 would invalidate the buyer exhaustion signaled by bitcoin’s repeated failure to hold onto gains above that level, as shown by candles with long upper wicks (see arrows).
That, however, looks unlikely, with the 14-week RSI rolling over from the overbought territory (above 70) and the MACD histogram losing altitude, a sign of weakening bullish momentum.
Also, on the three-day chart, the MACD has turned bearish for the first time since December.
All-in-all, the odds of BTC falling below $10,000 in the next day or two are high. On the downside, key support is located at $9,097 (May 30 high).