Bitcoin BTC/USD was trading slightly higher during Fridays 24-hour trading session, lagging the general market, which saw the S&P 500 popping up about 0.6% with many tech stocks rocketing higher following Tesla's positive earnings print.
The crypto sector hadbecome detached from the general market recently, with Bitcoin, Ethereum ETH/USD and Dogecoin DOGE/USD trading mostly sideways.
The sideways consolidation is healthy and needed because the three cryptos relative strength indexes reached overbought territory after massive surges in price, which started in late December. Continued sideways consolidation would help to drop the three cryptos RSI levels.
RSI is an indicator technical traders use to measure bullish and bearish price momentum. RSI levels can range between 0 and 100, with levels between 30 and 70 generally considered to be healthy. When a stocks RSI falls below the 30% level, it's considered to be oversold. When a stock enters oversold territory, it indicates the securities price no longer reflects the asset's true value, which can signal a reversal to the upside in the cards. When a stocks RSI rises above the 70% area, it is considered to be overbought. When a stock enters overbought territory, it signals the securities price is elevated to its intrinsic value, which can signal a reversal to the downside on the horizon.
RSI is best used when combined with other signals and patterns on a stock chart because stocks can remain in oversold and overbought territory for an extended period of time before reversing.
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The Bitcoin Chart: Bitcoin has been consolidating between about $22,298 and $23,824 since Jan. 21. On Thursday and Friday, Bitcoins consolidation took place in the form of a double inside bar, with all of the price action taking place within Wednesdays 24-hour trading range.
On Wednesday and Friday, Bitcoin retraced slightly to test the eight-day exponential moving average (EMA) as support and held above the level. The eight-day EMA hadbeen guiding Bitcoin higher Jan. 6 and mightcontinue to act as support.
If Bitcoin closedthe trading session near its high-of-day price, the crypto wouldprint a hammer candlestick, which could indicate higher prices will come on Saturday. If that happened, traders wouldwant to see Bitcoin burst up above Wednesdays high-of-day on higher-than-average volume, which could indicate a longer-term run is on the horizon.
Bearish traders want to see Bitcoin break down from its sideways trading range, which could indicate the current bull cycle has come to an end and a downtrend will occur.
Bitcoin has resistance above at $24,206 and $25,772 and support below at $22,729 and $21,313.
The Ethereum and Dogecoin Charts: Like Bitcoin, Ethereum and Dogecoin hadbeen trading in a sideways pattern and on Thursday and Friday were forming double inside bar patterns. Ethereums sideways pattern was taking place between $1,500 and $1,680. Dogecoin hadbeen consolidating between $0.077 and $0.093 since Jan. 13.
Also like Bitcoin, Ethereum and Dogecoin hadbeen mostly holding above the eight-day EMA, which mightcontinue to guide the cryptos higher. For short-term traders, a close under the eight-day EMA could be a solid exit strategy.
Ethereum and Dogecoin bulls want to see the cryptos break up from the horizontal pattern on higher-than-average volume, while bears want to see Ethereum and Dogecoin break bearishly down from the Jan. 18 low-of-days.
Ethereum has resistance above at $1,717.41 and $1,957.24 and support below at $1,564.17 and $1,421.80.
Dogecoin has resistance above at $0.091 and $0.099 and support below at $0.083 and $0.075.
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