Bitcoin: Expecting an eventual move to new highs

Bitcoin Daily chart (Chart source: Tradingview)

The graph above represents the daily chart of Bitcoin (Symbol: BTC/USD, Bitstamp). BTC and other crypto currencies are gaining a lot of attention from traders and investors these days given the massive swing in price movements seen in these instruments.
In the three-month period between mid-Sept and mid-Dec 2017, Bitcoin surged seven-folds from under $3,000 to nearly $20,000. However, as the saying goes, anything that goes up too much and too fast comes down in a similar fashion too. After hitting its life-time high, Bitcoin plummeted over 50 percent in exactly a month’s time, before regaining some of its lost footing.

After the plunge, BTC took support exactly at the 0.618 fibonacci retracement of the rally from Sept'17 lows of $2,972 to Dec'17 highs of $19,666. BTC also nearly completed the D leg of a bullish AB=CD harmonic pattern. Moreover, the bounce from these key support levels was also accompanied by the formation of a long-legged doji candle, a candle that signals an exhaustion of the current trend (in this case down). The three day consolidation near key support levels followed by an eventual move higher from this consolidation suggests that the recent low of $9,222 is now an important bottom.

Meanwhile, the 14-period RSI has been in a bull trend since Sept'2017 (Note: In a bull market, the RSI typically fluctuates in a band between 40 and 80, with the region around 40 usually acting as a support zone. In a bear market, the RSI usually moves in a band between 20 and 60, with the region around 60 acting as a resistance zone). It will be interesting to see how RSI moves around the 60 region. Break above this would be a confirmation of the resumption of uptrend. Alternatively, if RSI faces headwinds near 60 and goes on to drop below 40, it will be a early signal that the primary uptrend could be weakening. As of now however, given that the RSI has bounced off the bull market support area, the prevailing uptrend in BTC still remains pretty much intact. Also note that the higher low in price between Nov'17 and Jan'18 has been accompanied by lower low in the RSI. This pattern is called 'positive reversal' and has bullish implications.

Overall, considering the bounce off key support levels, the emergence of reversal candle patterns, and the RSI displaying bullishness, it looks like Bitcoin is headed higher in the short to medium term. The short-term target that I foresee is around $15,680 (which represents the 0.618 fibonacci retracement of the decline from $19,666 to $9,222) followed by my medium-term price objective of $21,920 (which represents the price target of the RSI positive reversal pattern). The recent swing low of $9,222 becomes an important support now. Break below this low would invalidate my bullish stance in BTC.