Bitcoin (BTC) Technical Analysis: Potential Inverse H&S Pattern Looking Promising, Here’s What You Need to Know
Bitcoin is starting to show signs of recovering today after experiencing a sudden post-Christmas crash earlier in the week. In the run-up to the festivities, BTC exploded over 34% from $3,131 on December 15 to $4,234 on December 24, as investors likely piled back into the crypto market in anticipation of a late Q4 rally or to potentially avoid the crashing world trade markets. However, this turned out to be a fairly short-lived pump which has already corrected 15% from its peak price point.
Looking at the 15min BTC/USD chart, we can see that there were three individual sell-offs - likely the work of Whale traders - which were largely responsible for forcing down BTC from its Christmas Eve high to where the market is now.
-The first sell-off on December 24 at 15:30 (UTC) crashed Bitcoin from $4,195 to $4,054 (-$141)
-The second and most significant sell-off occurred just 15 minutes into Christmas Day, and pushed Bitcoin’s price down even further from $4,032 to $3,814 (-$218)
-Then two days later, we saw another sudden sell-off shake up the market around 19:00 UTC, This time taking BTC from $3,736 back down to the $3,600 level (-$136).
Although Bitcoin’s short-term prospects appear bearish after this series of sell-offs, there has been a promising bullish pattern starting to take shape over the last month which could be hinting at a strong market reversal to come.
On the 4H BTC/USD chart, we can see that the #1 cryptocurrency is already halfway through completing a bullish inverse head and shoulders pattern. This particular pattern is a very strong trend reversal signal and, if completed, could drive BTC back towards its pre-Bitcoin Cash war value.
At the moment, we are waiting to see if the price action will continue inside the pattern and form the final right shoulder part of this pattern, but in order to do so there will need to be another strong bull run to take BTC back to the neckline above.
Right now, there is some consolidation along the $3,600 support but the $3,640 mark is creating problems for the buyers. This level has been a strong support/ resistance in the past for BTC and helped form the left shoulder of this pattern back on November 27. It is currently also being reinforced by the 100MA (thin blue line) which will make it much more difficult to overcome.
Looking at the 4H indicators, we get the impression that buying momentum is starting to unravel and that BTC will unlikely be able to break bullish over this resistance.
-Candles are starting to close beneath the 4H supporting kumo cloud on the Ichimoku indicator, with a bearish T/K divergence.
-The 12MA has diverged below the 26MA on the MACD indicator, and both moving averages are below the signal line.
-Signal dots on the Parabolic SAR indicator are showing up on top of the price action.
-On the RSI, the indicator line is down at 39% and starting to fall towards the oversold region as buying momentum decreases.
If this is the case, then it is likely that BTC will continue downward until it finds a new support where bulls can regain composure and attempt a new run.
If we look at the projected shoulder line (blue dashed line) on the image above, we can see that there should be a strong support for BTC where it intersects with the lateral $3,470 support. This could create a good platform for bullish traders to relaunch from in the short-term and attempt to break above the neckline. Overall this final impulse movement is well within reach for bullish traders, as the neckline lies only 20% above the $3,470 support.
Bitcoin (BTC) Price Targets
All price targets are calculated from Bitcoin’s current value at $3,610 (AToW).
R2: $3,810 (5.54%)
R3: $4,150 (14.96%)
S1: $3,460 (-4.16%)
S2: $3,320 (-8.03%)
S3: $3,125 (-13.43%)