Crypto Charts Analysis #1 Bitcoin 4th July 2017
***Disclaimer***
Please keep in mind : The risk of loss in trading can be substantial. I am not offering financial advice nor am I telling you how or what you should be trading. I will simply be applying charting techniques I have learnt over the years. If, of your own free will, you decide to trade never trade with money you cannot afford to lose and if you do trade, try to spread out your trades on multiple assets. A diverse portfolio is much better than only holding a single asset.
***End of Disclaimer***
Hey all. As I mentioned in my #introduceyourself post, two of the things I enjoy are trading and cryptocurrencies. So I have decided to share my analysis and thoughts with you.
Today I was having a look at the king of cryptos. Yes I'm talking about bitcoin. We can see a very nice uptrend but wait... is that a head and shoulders pattern? Should we be expecting a downward move or has the retest of the neckline shown that this was rejected and it is simply a failed head and shoulders?
It's no secret that Bitcoin is in a major uptrend seeing massive gains in a very short period of time and corrections along the way. These corrections can be brought about by different means. An unexpected news headline, like what happened with Ethereum when fake news circulated stating Vitalic Buterin died, or some other unexpected event could send the masses panicking to buy or sell. Or it could simply be profit taking at some psychologically meaningful level. The way in which people take their profit, or take losses if their stop loss is hit, can end up showing as a chart pattern. Not every pattern plays out till completion and some also fail.
The BTC/USD daily candle stick chart, shown above, has one such chart pattern. The heads and shoulders pattern. This is generally seen as a reversal pattern.
Plotting head and shoulders Price movement
Head Peak Price Level : $3003
Head Low Price Level : $2046
Possible Lowest Price Movement on breaking neckline = Head Peak Price Level - Head Low Price Level
($957 = $3003 - $2046)
So what does all this mean?
If the price breaks through the neckline then we can possibly see quite a big move downward if you had to simply take the measurement approach to where the price will reach. i.e. without considering any other possible support levels where the price could bounce off of and reverse in the opposite direction once more.
So what could happen to the price?
1. If we see a break and close below the neckline then there is a good possibility that bitcoin's price will correct some more. If this is the case there are 3 levels I would look out for.
- The first support that could be tested may be at around $1900 (marked in Yellow - Conservative bottom).
- The second support that could be tested may be at $1700 (not marked on the screen shot).
- The third would only be reached if the head and shoulders pattern reaches its full run, at around $1300 (This depends highly on where the candle stick breaks the neckline. Quick example: If the breakout candle intersects the neckline at $2400. We would subtract the "Possible Lowest Price Movement on breaking neckline" of $957 from $2400, the intersect price. So $2400 - $957 = $1443. $1443 would be the maximum we would expect the price to reach.).
2. A break of the right shoulder. If price keeps moving up and a new high is created this can be an indication that the head and shoulders pattern has failed and the neckline can safely be used as a trend line offering support and resistance to BTC/USD.
So fellow Steemians, investors, traders and crypto enthusiasts what is your take on where the price of bitcoin is going? Do you agree or disagree with this analysis or do you have your take on what the chart is showing and which direction bitcoin will take.
Further reading
How Bitcoin traders are interpreting a head and shoulder graph pattern
Head and Shoulders Top (Reversal)