Watch These Bitcoin Price Levels as Cryptocurrency Back Near Record High

Bitcoin (BTCUSD) has rallied over the past week to approach the record high it set last month, tracking the strong performance of U.S. equities and encouraging signals about the U.S. economy.

The legacy cryptocurrency moved as high as $110,400 Wednesday morning after a closely watched inflation report showed that consumer prices rose less than expected last month, good news for investors who are hoping the Federal Reserve could be in a position to cut its benchmark interest rate this year. The price of bitcoin dropped to $108,800 recently, as U.S. stocks backed off their earlier highs as well.

Once a fringe financial asset dismissed by the mainstream, cryptocurrencies have gained new legitimacy this year thanks in part to the support of President Donald Trump and several allies in Congress. The price of bitcoin has also been supported by surging demand from publicly traded companies, such as Strategy (MSTR), that use proceeds from equity sales to purchase bitcoin for corporate treasuries. Meanwhile, total assets in bitcoin exchange traded funds have ballooned to $132 billion this month, up from $91 billion in early April, pointing to growing institutional interest in the cryptocurrency.

Bitcoin last hit a record high, of just under $112,000, on May 22. The digital currency has gained about 16% since the start of the year, far outpacing the performance of major stock indexes.

Below, we take a closer look at Bitcoin’s chart and apply technical analysis to identify key price levels worth watching out for.

Flag Pattern Breakout

After hitting its all-time high last month, bitcoin’s price consolidated within a flag, a chart pattern that indicates a continuation of the cryptocurrency’s uptrend that started in early April.

Indeed, the digital asset staged a decisive breakout above the pattern earlier this week, laying the groundwork for a new move higher. Meanwhile, the relative strength index confirms bullish price momentum, though the indicator remains below overbought levels, providing ample room for further upside.

In another win for bitcoin bulls, the 50-day moving average (MA) crossed above the 200-day MA last month to form a bullish golden cross signal.

Let’s identify two key overhead areas to watch amid the potential for further buying and also locate support levels worth monitoring during profit-taking periods.

Key Overhead Areas to Watch

The first overhead area to watch sits around $112,000. This area on the chart will likely attract significant scrutiny near last month’s peak.

A move higher could see bitcoin rally toward $137,000. We projected this target by extracting the price bars comprising the cryptocurrency’s uptrend that preceded the flag and repositioning them from the pattern’s breakout area.

We selected this prior trend as it commenced following a breakout from a pennant pattern in late April, providing clues as to how the current breakout from a period of consolidation may unfold.

Important Support Levels Worth Monitoring

During profit-taking, investors should initially monitor the $107,000 level. A retest of the prominent December and January peaks may be necessary before the cryptocurrency makes a meaningful move higher.

Finally, a deeper retracement could see bitcoin’s price revisit the closely-watched $100,000 level. This area would likely provide support near the psychological round number and a trendline that connects a range of corresponding trading activity on the chart stretching back to last November.

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As of the date this article was written, the author does not own any of the above securities.