In the last education post, I demonstrated the fundamentals of an Inverse Head and Shoulders pattern, which played out beautifully. Bitcoin surpassed the projected target by nearly 9%. This post has been made to see whether the pattern will continue to complete itself or if Bitcoin will continue on its downtrend.
link to this post below
Bitcoin is once again returning the previous Neckline resistance. IF this pattern continues to play out, this resistance should now turn support, and BTC could resume on its way up.
As many of us know that there is no 100% guarantee to any chart pattern. However many people, myself included, sometimes become too stuck on one pattern and its outcome, and to not fully recognize the fact that it can fail.
Fundamentals of a Head and Shoulders Bottom.
Prior Trend: The reason it is called a head and shoulders bottom pattern, is because it occurs after a previous downtrend. So we first must check that the trend is down before considering this pattern.
The Body: The reason it is called a head and shoulders pattern is due to its shape. The head is ALWAYS the lowest point in this pattern, while the left and right shoulders sit at similar levels above the head. All three of these points then share the same resistance level know as the neckline.
Neckline: The neckline forms by connecting the highs following the left shoulder and the head of the pattern. This line can slope up, slope down, or be horizontal. This is the key level to break in this pattern.
Right Shoulder: There seems to lots of controversy with the right shoulder, some believe that this level must at the exact same or higher level than the left shoulder. However this is not the case. While symmetry is preferred, sometimes the shoulders can be out of whack, and the right shoulder will be higher, lower, wider, or narrower.
Volume: Since this pattern forms on the bottom of bear trends, there should be heavy selling volume on the left and right shoulders, while the right shoulder should be accompanied by light selling pressure.
The most important moment for volume occurs on the advance from the low of the right shoulder. For a breakout to be considered valid, there needs to be an expansion of volume on the advance and during the breakout.
Neckline Break: In order for this pattern to complete itself. There MUST be a break above the neckline. Otherwise the neckline remains resistance the the trend continues downwards.
Confirmation: Some believe the neckline break serves as confirmation.
Target: The preferred target may be measured by taking the distance from the bottom of the head up to the neckline. While this is just a preferred target, one must consider other possible resistance levels.
--- Where we are now ---
Resistance Turned Support: IF this is a true Head and Shoulders Bottom, once resistance is broken, it is common for this same resistance level to turn into support.
IF Bitcoin fails to hold this neckline, then it is likely that it will continue on with is downtrend to new lows.
Remember, even with all the patterns out there, there is never a 100% guarantee in trading.
I wish you all the best of luck!
I Hope you all found this educational post interesting and maybe even a little helpful!
Please let me know if you would like for me to continue making these!
part 1:
DISCLAIMER:
Please note I am only providing my own trading information for your benefit and insight to my trading techniques, you should do your own due diligence and not take this information as a trade signal.
link to this post below
Bitcoin is once again returning the previous Neckline resistance. IF this pattern continues to play out, this resistance should now turn support, and BTC could resume on its way up.
As many of us know that there is no 100% guarantee to any chart pattern. However many people, myself included, sometimes become too stuck on one pattern and its outcome, and to not fully recognize the fact that it can fail.
Fundamentals of a Head and Shoulders Bottom.
Prior Trend: The reason it is called a head and shoulders bottom pattern, is because it occurs after a previous downtrend. So we first must check that the trend is down before considering this pattern.
The Body: The reason it is called a head and shoulders pattern is due to its shape. The head is ALWAYS the lowest point in this pattern, while the left and right shoulders sit at similar levels above the head. All three of these points then share the same resistance level know as the neckline.
Neckline: The neckline forms by connecting the highs following the left shoulder and the head of the pattern. This line can slope up, slope down, or be horizontal. This is the key level to break in this pattern.
Right Shoulder: There seems to lots of controversy with the right shoulder, some believe that this level must at the exact same or higher level than the left shoulder. However this is not the case. While symmetry is preferred, sometimes the shoulders can be out of whack, and the right shoulder will be higher, lower, wider, or narrower.
Volume: Since this pattern forms on the bottom of bear trends, there should be heavy selling volume on the left and right shoulders, while the right shoulder should be accompanied by light selling pressure.
The most important moment for volume occurs on the advance from the low of the right shoulder. For a breakout to be considered valid, there needs to be an expansion of volume on the advance and during the breakout.
Neckline Break: In order for this pattern to complete itself. There MUST be a break above the neckline. Otherwise the neckline remains resistance the the trend continues downwards.
Confirmation: Some believe the neckline break serves as confirmation.
Target: The preferred target may be measured by taking the distance from the bottom of the head up to the neckline. While this is just a preferred target, one must consider other possible resistance levels.
--- Where we are now ---
Resistance Turned Support: IF this is a true Head and Shoulders Bottom, once resistance is broken, it is common for this same resistance level to turn into support.
IF Bitcoin fails to hold this neckline, then it is likely that it will continue on with is downtrend to new lows.
Remember, even with all the patterns out there, there is never a 100% guarantee in trading.
I wish you all the best of luck!
I Hope you all found this educational post interesting and maybe even a little helpful!
Please let me know if you would like for me to continue making these!
part 1:
Please note I am only providing my own trading information for your benefit and insight to my trading techniques, you should do your own due diligence and not take this information as a trade signal.
Creator of DepthHouse Indicators on TradingView!
↣ depthhouse.com/
↣ depthhouse.com/
