BITCOIN - Be Ready for Breakout above $14,000!

[Monfex]

BITCOIN - Inverse Head and Shoulders Pattern? + Signals

Hi, everyone!

What we’re seeing right now on the Bitcoin price chart is perhaps one of the most widely recognized trend continuation patterns, which is called an inverse head and shoulders pattern.
This pattern basically signals that traders should not expect a change in the direction of the financial instrument’s price.
Evidence that the trend is about to continue is obviously important, so this continuation pattern is noteworthy.

How does it work?

The pattern consists of three segments. Volume is an important characteristic in interpreting this pattern. Because an inverse head and shoulders pattern indicates a trend continuation, a clear trend must exist prior to the formation of the pattern.
In our case, there was a strong upward trend, which began in February 2019 and gained momentum in June.
So, we can safely assume that this pattern does have predictive validity.

The price chart above depicts an inverse head and shoulders pattern for Bitcoin on a 4-hour (H4) timeframe.
The three parts of the pattern are as follows:

Left shoulder: This part appears to show a strong downwards retracement from the local high at $14K, with the slope of the retracement being greater than the prior uptrend, on strong volume .

Head: The head is a more pronounced version of the left shoulder. The second downwards retracement following the first shoulder took the Bitcoin to a lower low than the left shoulder by a significant enough margin to be clearly evident on the price chart. Volume is lower in this retracement, however than in the one that formed the left shoulder, which is typical.

This second retracement also fails, with price gaining back up to the same level at which the left shoulder began and ended. This price level is called the neckline - $12k in our case. This head pattern is the first signal that the downwards retracement may be coming to an end and that a reversal UPWARDS may be starting.

Right shoulder: The right shoulder is a mirror image (or close to a mirror image) of the left shoulder but on lower volume , signifying LESS selling enthusiasm. The price declined to roughly the same level as the left shoulder, but the decline reversed at a higher low price than the decline that formed the head.

This chart pattern generates a valid & strong trade signal:
- Buy Bitcoin at $12,000 (when the price adjusts slightly downwards)
- Take-profit at $15,000
- Stop-loss at $10,600
- Forecasted P&L: $30,000 per 1 lot with 10x leverage
- Risk/reward ratio: 1:1.6 (attractive)

If you enjoyed this article, then

- Take advantage of our superior trading terminal on Monfex
- Trade with up to 50x leverage with zero commission on Monfex
- Discover new trading ideas onTrading View

This analysis has been prepared for you by Monfex- a revolutionary cryptocurrency trading platform.