Hi all,
As BTCUSD continues to consolidate inside a triangle pattern on the smaller timeframes, I wanted to point out the possibility of a Head and Shoulders pattern developing on the 12-hour timeframe along with some other indicators pointing towards a trend reversal.
1. Price Action: Currently, BTCUSD is printing a doji candle indicating price is around an area of indecision. The bulls are really trying to push the price up and are holding a very strong and important trendline (bottom blue line of channel). We have been trading inside a bullish channel whose midpoint (black dotted line) has now acted as resistance during our last push up this past week stopping BTCUSD latest rally from creating a new higher high.
2. Head and Shoulders: Looking at this 12-hour chart, we can clearly see the development of a head and shoulders pattern. The neckline of this head and shoulders is coinciding with the trendline previously mentioned. It is important to note that If BTCUSD were to confirms this head and shoulders by piercing through its neckline (purple dotted line), it would also be piercing our very important support trendline, which could indicate a reversal and new downward trend given the bears control.
3. Moving Averages: For moving average, I typically like to use 20 MA (purple) along with the 50 (yellow), 100 (orange) and 200 (red) EMA. As you can see, our 20 MA (purple) is acting as some sort of resistance for BTCUSD with the 50 EMA (yellow) kind of joining forces with our previously discussed trendline. This is yet another indication of the significance for BTCUSD to hold this area.
4. Volume: Since making its all-time high at 41986.37 using Coinbase's chart, we continue to see a decline in volume, this could potentially be another indication of bulls losing momentum.
5. RSI and MACD: When the all-time high was create back in Jan. 8th, it did so by making a very clear bearish divergence in the RSI, which was quickly followed by a selloff causing RSI to fall and test the 50-level area, we have since bounced twice from the 50-level mark but are trading barely just above this level. For those not familiar with RSI, many traders consider the 50-level area to be the midpoint between Bullish and Bearish conditions. RSI above 50 indicates buying while RSI below 50 indicates selling. Shifting our attention quickly to MACD, there is a clear death cross that occurred after hitting our all-time high and we have been trending down ever since.
6. ADX and DI: After forming the peak of our right shoulder, we saw DI- cross up on DI+ (red crossing up on green line) with ADX (black line) falling below 20 level, this could be indicating our uptrend coming to an end or we could see some sideways action until a new trend is established.
So now what? Does this mean BTCUSD is going to crash? No, not necessarily, BTCUSD could invalidate all these bearish signs if it bounces off the support line and is able to make a new higher high.
I think the best course of action now is to remain vigilant and be patient. Take a pause and analyze any positions you may already have or any new positions you may want to take. Patience, preparedness, and awareness is what is important right now.
P.S please remember these are just ideas and not trading advise.
As BTCUSD continues to consolidate inside a triangle pattern on the smaller timeframes, I wanted to point out the possibility of a Head and Shoulders pattern developing on the 12-hour timeframe along with some other indicators pointing towards a trend reversal.
1. Price Action: Currently, BTCUSD is printing a doji candle indicating price is around an area of indecision. The bulls are really trying to push the price up and are holding a very strong and important trendline (bottom blue line of channel). We have been trading inside a bullish channel whose midpoint (black dotted line) has now acted as resistance during our last push up this past week stopping BTCUSD latest rally from creating a new higher high.
2. Head and Shoulders: Looking at this 12-hour chart, we can clearly see the development of a head and shoulders pattern. The neckline of this head and shoulders is coinciding with the trendline previously mentioned. It is important to note that If BTCUSD were to confirms this head and shoulders by piercing through its neckline (purple dotted line), it would also be piercing our very important support trendline, which could indicate a reversal and new downward trend given the bears control.
3. Moving Averages: For moving average, I typically like to use 20 MA (purple) along with the 50 (yellow), 100 (orange) and 200 (red) EMA. As you can see, our 20 MA (purple) is acting as some sort of resistance for BTCUSD with the 50 EMA (yellow) kind of joining forces with our previously discussed trendline. This is yet another indication of the significance for BTCUSD to hold this area.
4. Volume: Since making its all-time high at 41986.37 using Coinbase's chart, we continue to see a decline in volume, this could potentially be another indication of bulls losing momentum.
5. RSI and MACD: When the all-time high was create back in Jan. 8th, it did so by making a very clear bearish divergence in the RSI, which was quickly followed by a selloff causing RSI to fall and test the 50-level area, we have since bounced twice from the 50-level mark but are trading barely just above this level. For those not familiar with RSI, many traders consider the 50-level area to be the midpoint between Bullish and Bearish conditions. RSI above 50 indicates buying while RSI below 50 indicates selling. Shifting our attention quickly to MACD, there is a clear death cross that occurred after hitting our all-time high and we have been trending down ever since.
6. ADX and DI: After forming the peak of our right shoulder, we saw DI- cross up on DI+ (red crossing up on green line) with ADX (black line) falling below 20 level, this could be indicating our uptrend coming to an end or we could see some sideways action until a new trend is established.
So now what? Does this mean BTCUSD is going to crash? No, not necessarily, BTCUSD could invalidate all these bearish signs if it bounces off the support line and is able to make a new higher high.
I think the best course of action now is to remain vigilant and be patient. Take a pause and analyze any positions you may already have or any new positions you may want to take. Patience, preparedness, and awareness is what is important right now.
P.S please remember these are just ideas and not trading advise.
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