The best word to describe Bitcoin’s current market is unpredictable. After the big $100 drop earlier this month which officially ended the 4 month long bull wave we have been riding, all signs pointed to consolidation in the $380 range, however, last week the price unexpectedly jumped $40 in 1 day. Those that weren’t greedy and sold when they saw the big green candle got out at the right time because soon after the market crashed back down to the $380 level.
Mike Hearn’s vocal departure didn’t help with the price recovery and the attacks towards the Bitcoin community seemed to coincide quite well with the emergence of the bear market. Bitcoin, the honey badger of money does not seem to have much regard to any negativity shining it’s way. Whether its called a failed experiment, or bills are being lobbied to ban it, the reality of the situation is that the Bitcoin network is operating as intended. On tradingview, many traders decided to short the market as all technical analysis was pointing to more sells incoming. However, against all odds Bitcoin’s price is holding strong at $390 after an earlier high of $403.
purpurato59 from tradingview provided the following chart and posted: “If you use the weekly time interval and chart price back to the 1200 peak, you will find an interesting thing about OBV: we are at the same point, and we seem to have done a double peak. On the other hand, indicators like the RSI seem to be completing a H&S pattern which would be the beginning of a huge bear cycle. If this is the case, we could go back on the $300’s or lower. I hope it’s not, but it should be considered anyway.”
Chart taken from tradingview.com
The head and shoulders pattern purpurato59 is reffering to is highlighted in purple. For those that do not know, OBV (showed as the blue line in the chart) stands for on balance volume. Joseph Granville who developed the metric in the 1960s believed that when a stock’s volume increases rapidly without much change to the actual price then that signals that a big movement in price is coming. Combined with a head and shoulders which signals a trend reversal, we may see much more downwards pressure.
On the upside, if we zoom into the 1 hour interval we can see a reverse head and shoulders pattern. Such a pattern is often indicative of a trend reversal in upward direction. In such a pattern, after the last shoulder ends we should see a breakout accompanied with large buy volume. Many traders wait for a large volume candle to validate the breakout.
Chart taken from bitcoinwisdom.com
Currently, there is not breakout in sight, however the market still has time to form the breakout necessary to send bitcoin back up past the $400 levels.
UPDATE 1/29: Unfortunately the market never broke out and the reverse H&S did not hold.
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