Bitcoin Head and Shoulders BEARISH
Bitcoin is looking weak at the moment with a bearish looking head and shoulders pattern that has formed since the 5th of August.
At the time of writing the price is currently at the neck line depicted by the dotted pink line.
Typically during a head and shoulders pattern, the price will eventually break below the support of the neckline. Next, price often reverses to retest the neckline as a resistance. If the resistance holds, price usually will continue moving downwards to a distance equal to the length from the top of the head down to the neckline subtracted from the top of the right shoulder. This is a conservative way to estimate a price level in which the pattern should reach comfortably.
The level in which I predict price should reach is shown by the horizontal grey line at $54,659.
An entry at the neckline is acceptable at the current price of $59,107 and with a stop loss set slightly above the top of the right shoulder at $62,013, a risk to reward ratio of 1.45 can be achieved. If desired, you could wait for price to rise to get an improved risk to reward ratio however you may miss this opportunity if you do this.
Also in the chart is the volume profile (blue and yellow horizontal bars on the left). This indicator shows the volume of Bitcoin that was traded at certain price levels. The highest volume occurred at the $57,700 level, and is called the point of control (POC), which means a bounce here is quite likely. Therefore expect a bounce then a retest of the neckline as a resistance before the price continues lower.
Thank you for reading this analysis I hope you found value in it and I welcome you to share any thoughts or alternate views!
At the time of writing the price is currently at the neck line depicted by the dotted pink line.
Typically during a head and shoulders pattern, the price will eventually break below the support of the neckline. Next, price often reverses to retest the neckline as a resistance. If the resistance holds, price usually will continue moving downwards to a distance equal to the length from the top of the head down to the neckline subtracted from the top of the right shoulder. This is a conservative way to estimate a price level in which the pattern should reach comfortably.
The level in which I predict price should reach is shown by the horizontal grey line at $54,659.
An entry at the neckline is acceptable at the current price of $59,107 and with a stop loss set slightly above the top of the right shoulder at $62,013, a risk to reward ratio of 1.45 can be achieved. If desired, you could wait for price to rise to get an improved risk to reward ratio however you may miss this opportunity if you do this.
Also in the chart is the volume profile (blue and yellow horizontal bars on the left). This indicator shows the volume of Bitcoin that was traded at certain price levels. The highest volume occurred at the $57,700 level, and is called the point of control (POC), which means a bounce here is quite likely. Therefore expect a bounce then a retest of the neckline as a resistance before the price continues lower.
Thank you for reading this analysis I hope you found value in it and I welcome you to share any thoughts or alternate views!
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