During the week of November 17-24, the Bitcoin price decreased by 20 percent.
Afterward, financial commentator Peter Schiff made a prediction that the Bitcoin price will fall to around $1000.
A similar prediction was made by well-known Tradingview analyst @MagicpoopCannon, who stated that there is a possible head and shoulders (H&S) developing in the Bitcoin price since May. According to the target, the BTC price will fall to $1000.
— MAGIC (@MagicPoopCannon) November 25, 2019
Will it actually do so? Continue reading below in order to find out.
Head and Shoulders?
While the pattern created resembles an H&S, it looks highly irregular.
First, the length of the head portion of the pattern is more than four times that of the shoulders. Also, there is a significant difference in the height of the right and left shoulders.
Secondly, the volume pattern is unorthodox. Volume in H&S patterns is often the highest at the left shoulder before decreasing in the formation of the head. The volume is even lower in the right shoulder and picks up as the price decreases from the top of the right shoulder.
In Bitcoin’s pattern, volume was higher in the formation of the head than the left shoulder. Furthermore, it was higher in the increase leading up to the right shoulder than in the ensuing decrease. Since the H&S is a bearish pattern, this is quite uncommon
The only volume occurrence that is consistent with a textbook H&S is the increased volume during the decrease from the head to the neckline.
Long-Term Support for Bitcoin
A target of $1000 seems even more unlikely when looking at long-term movement.
First, in order to reach it, the Bitcoin price would have to break down from the long-term support line in place since 2011. Also, a decrease to $1000 would cause the price to fall below the 200-week moving average (MA). The Bitcoin price has never done that.
Finally, the increase leading up to the H&S occurred from $3000. Since the H&S is a reversal pattern, it would make sense if the retracement was contained within this increase. Prices below $1000 have not been seen since the beginning of 2017.
For a pattern with a duration of roughly six months to cause a decrease that leads to prices not seen for more than two years would be very unusual.
To conclude, the creation of a head and shoulders pattern seems unlikely due to the irregularities in the pattern, previous support, and the 200-week MA.
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 Shutterstock, TradingView.
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