By ForexTime
- Bitcoin pulls back after soaring to 6-week high
- Prices broke beyond neckline of “inverse head-and-shoulders”
- $30k handle could be attained if pattern plays out
- ADX, RSI indicators also suggest more immediate headroom
Bitcoin on Monday (Oct 2nd) surged to its highest levels since Aug. 17th!
Cryptos climbed as Ether futures exchange-traded funds (ETF) were launched in the US at the start of this week.
Along the way, Bitcoin broke through the neckline of an inverse head-and-shoulder pattern, to a high of $28604.38.
Bulls delivered a strong close above its 50-day SMA but gave up close to 50% of its rally for the day.
This “area of surrender” for Bitcoin bulls coincides with the resistance line of the upward-sloping channel, drawn from the September 1st high of $26,137.37.
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Inverse head-and-shoulder pattern has measured move objective of $2,633.38.
Note that Bitcoin has been able to retrace its steps from that $24,871.78 inverse head’s intraday low on September 11th, back towards its neckline.
This suggests that a similar-sized move ($2,633.38) could materialize to the upside
In fewer words, should this pattern play out, Bitcoin may get to within touching distance of the $30,000 handle.
According to Thomas Bulkowski, in his book “The Encyclopedia of Chart patterns” this reversal pattern has a 9% failure rate and meets its target 51% of the time.
Broken neckline: retested
At the time of writing, Bitcoin is paring yesterday’s surge to move back closer to the broken neckline.
Failure to close back below the broken neckline or the significant 78.6 Fibonacci level at $27446.25, could embolden Bitcoin bulls to test the 100 Fibonacci level at $28147.19 with eyes set on the upper line of the ascending channel mentioned above.
The Fibonacci levels are taken from August 29th’s high at 28147.19 to September 11th’s low of $24871.78.
Technical indicators suggest limited immediate gains
The Average Directional Movement Index (ADX) – an indicator that displays directional trend strength – is showing a strong bullish strength as it is above its 20 threshold and pointing upwards.
Furthermore, we see the 14-day relative strength index (RSI) tethering on the edge of being overbought, with room for a marginal move to the upside.
Overall, Bitcoin bulls will be hoping that seasonality will kick in once more, given that Q4 tends to see double-digit gains for the world’s oldest and largest crypto.
Article by ForexTime
ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com
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