Bitcoin looks set to post the first monthly gain since June. The percentage rise, however, may be less than 10 percent as the daily chart is reporting signs of buyer exhaustion.
A triangle breakdown on the hourly chart, if confirmed, could yield a pullback to support at $8,820.
A high-volume contracting triangle breakout will likely yield a re-test of recent highs above $10,000.
Bitcoin (BTC) is on track to end a three-month losing streak, having recovered from recent lows around $7,400 seen a week ago.
The number one cryptocurrency is currently priced at $9,200 on Bitstamp – up 11 percent from the Oct. 1 opening price of $8,304.
If confirmed, the close would mark the first monthly gain since June, as the cryptocurrency fell by 6.27, 4.8 and 13.51 percent in July, August and September, respectively. The three-month losing trend was the longest since January 2018.
Bitcoin fell by 6.27 percent in July, ending the five-month run of gains, which saw prices climb from $4,000 to $13,880.
The October rise would be the sixth monthly gain of 2019.
It is worth noting that BTC was trading at four-month lows below $7,400 a week ago and appeared set to post a loss for the fourth consecutive month.
The tide, however, turned in favor of the bulls on Friday and Saturday, when bitcoin shot up 42 percent from $7,500 to $10,350.
The monthly gain would have been in excess of 20 percent had the cryptocurrency held on to gains above $10,000. BTC, however, quickly fell back into four figures and has witnessed solid two-way business in the range of $9,950 –$9,050 in the last 48 hours.
The technical charts indicate the probability of BTC falling all the way back below the monthly opening price of $8,304 is low. However, prices could fall to former resistance-turned-support of $8,820, in which case the monthly gain would be less than 10 percent.
BTC has carved out a low-volume narrowing price range or contracting triangle on the hourly chart. A dip below the lower edge, currently at $9,100, would confirm a triangle breakdown and could accelerate the correction to $8,820.
A violation there would expose next support lined up at $8,474 (horizontal line), although a sustained drop below $8,820 looks unlikely.
Bitcoin would likely challenge recent highs above $10,000 if the contracting triangle ends with a high-volume breakout. At time of writing, the upper edge of the triangle is seen at $9,500.
Daily and 4-hour charts
The repeated failure to hold on to gains above the 100-day moving average and Monday’s daily red candle with the long upper shadow indicate buyer exhaustion.
Further, the 4-hour line chart is showing a channel breakdown, meaning consolidation has ended with a downside break, opening the doors for a deeper pullback.
Therefore, the probability of BTC diving out of the narrowing price range on the hourly chart is high.
Monthly and weekly charts
Bitcoin closed well below the July low of $9,049 in September (above left), confirming a downside break of the narrowing price range.
The bearish pattern is still valid as prices are holding well below the September high of $10,949.
Traders, however, need not wait for a bull market confirmation above $10,949 and could adopt a bullish stance if prices manage to end the week (Sunday, UTC) above $9,725. That would confirm a falling channel breakout on the weekly chart (above right).
Disclosure: The author holds no cryptocurrency assets at the time of writing.
Bitcoin image via Shutterstock; charts by Trading View