Bullish divergence, TD9 buy-signal for a new bitcoin relief rally

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The price of Bitcoin (BTC) has risen sharply in the past 24 hours, from under $ 17,600 to $ 18,400. Now two key technical indicators are signaling the likelihood of a major relief rally.

Bitcoin’s 4-hour price chart shows a bullish divergence while issuing a TD9 buy signal. Both of these indicators usually light up when an asset is experiencing a strong selloff and selling pressures are exhausted.

The Bitcoin sell-off could be losing steam

The 4 hour bullish divergence and the TD9 buy signal are conceptually similar in that they occur after a steep correction.

A bullish divergence is a technical pattern that revolves around the Relative Strength Index (RSI). The RSI is a momentum indicator that measures whether an asset is overbought or oversold.

The RSI has a scale from 0 to 100; Under 35 means an asset is oversold and over 75 means an asset is overbought. When the RSI drops below 35 and an asset begins to rebound, a bullish divergence arises.

The Bitcoin 4-hour price chart with RSI. Source: TradingView, Scott Melker

Scott Melker, a cryptocurrency trader, said Bitcoin’s 4-hour price chart showed a bullish divergence as the price rebounded above $ 18,150. He said:

“We all know we have a nice confirmed oversold bullish divergence with RSI. RSI is currently pushing for descending resistance. If it catches on, the price should follow. I don’t intend to close for long. “

As Cointelegraph previously reported, Bitcoin has seen strong selling pressure from whales and miners over the past week. As a result, the BTC price has dropped sharply in the past two days, resulting in it being turned off in lower time periods, e.g. the 4-hour chart.

A pseudonymous trader called “CryptoISO” emphasized that the buy signal from the TD9 indicates an excessive sell-off.

TD9, short for Tom Demark 9, is an indicator that, similar to the RSI, also measures whether an asset is overbought or oversold. A TD9 buy signal arises when the last nine candles are all lower than the four previous candles.

For example, let’s say that the price of Bitcoin has been below $ 19,000 in the past 36 hours. If the 4 hour candle, which closed 52 hours ago, was above $ 19,000, a TD9 buy signal would light up.

The combination of the 4-hour bullish divergence and the TD9 buy signal shows that Bitcoin has been heavily oversold for the past three days.

What’s next?

As Cointelegraph reported, whale clusters have $ 17,170 and $ 17,700 as the main levels of support. As long as Bitcoin stays stable above these two levels, the chances of another rally remain high.

The Bitcoin price compared to the USDT offering. Source: Glassnode

Another bullish factor above the two levels of support for whale clusters is the growing supply of Tether (USDT), whose market cap is now nearly $ 20 billion.

On the major Bitcoin exchanges, such as Binance, investors often store secondary capital in USDT rather than cash, as this allows them to re-enter positions quickly. The steady rise in USDT supply is a positive sign of increasing confidence in Bitcoin.