Bitcoin is trading inside of a descending wedge. It seems to have just finished the right shoulder of a head and shoulders pattern. The ensuing breakdown could take us to the support line of the wedge — finishing the fifth and final wave of the correction.
- The Bitcoin price is following an ascending support line.
- There is a possible head-and-shoulders pattern in development.
- There is resistance at $8400.
- There is support at $7800-$7900.
- The 50- and 200-day moving averages are close to making a bearish cross.
The ascending support line that has been in place since the beginning of October was validated again.
After creating a triple top at the resistance area of $8400, the price decreased all the way to the ascending support line. However, it has not yet initiated a bounce and there is no bullish divergence or MA support to confirm that it will.
Bullish or Bearish
Looking at the daily chart, we have very conflicting indications in the direction of the next move.
On the bearish side, which is stronger, we have a possible head and shoulders (H&S) forming — with the recent highs acting as the right shoulder. This is strengthened by the possible death cross by the 50- and 200-day moving averages (MA).
On a more bullish note, the daily candlestick formation around $7800 suggests strength.
On September 30, the price created a bullish hammer — with the entire $7800-$7900 area being a lower wick that was quickly bought up. On October 7, the price again reached this area and created a bullish engulfing candlestick. The same thing happened on October 20.
However, we are leaning on being bearish.
A breakdown would fit with our wave count since we reached the June 26 high. The possible breakdown would complete the fifth and final wave of the correction. In this scenario, the fourth wave ended at the top of the head in the H&S pattern.
Good luck and happy trading! For yesterday’s analysis click here.
Disclaimer: This article is not trading advice and should not be construed as such. Always consult a trained financial professional before investing in cryptocurrencies, as the market is particularly volatile.
Images courtesy of Twitter, TradingView.