On March 7, the Bitcoin price initiated a rapid downward move that continued until the price found support at $7,700 two days later. Looking at the long-term chart since July 2019, this area could serve to create the right shoulder of a long-term inverse head and shoulders (H&S) pattern.
Bitcoin (BTC) Price Highlights
- The price is possibly trading inside an inverse head and shoulders pattern.
- It has broken out above a long-term descending resistance line.
- There is support at $7,750 and $7,300.
Well-known crypto trader @CryptoBull outlined a Bitcoin chart that shows a possible inverse head and shoulders pattern being created in higher time-frames. The inverse H&S is considered a bullish reversal pattern, one that would eventually lead to a breakout. It seems as if the price is currently in the process of creating the right shoulder.
The head and shoulders pattern is believed to be one of the most reliable trend reversal patterns#Bitcoin pic.twitter.com/oTyae5WiOK
— Crypto₿ull (@CryptoBull) March 10, 2020
Is the BTC price really trading inside an inverse H&S? If yes, when will it break out? Continue reading below in order to find out.
Inverse Head And Shoulders
If the price is indeed trading inside this pattern, it is currently in the process of completing the right shoulder.
The pattern has been transpiring over a long period of time, more specifically 175 days. In addition, a breakout that travels the entire height of the pattern would take the price all the way to $14,000, slightly above the June 2019 highs. Therefore, it would likely confirm that the price is in a bullish trend.
Previous Breakout
When we zoom out, we can see that the price broke out from a descending resistance line on Jan. 13 and validated it after 10 days.
The current decrease could be another validation of this line. However, the price is currently resting above the $7,700 support level, with the next one being at $7,350 (red line). The red line presents the absolute lower limit that the price can reach and still not invalidate the inverse H&S pattern.
On the other hand, there is resistance at $8,550 and $9,200 (green line). A close above the latter would go a long way in confirming that BTC is in the process of creating the right shoulder,
Long-Term Movement
From the weekly chart we can see that the price is possibly trading inside a long-term symmetrical triangle. The right shoulder support and pattern neckline are shown with dashed white lines.
However, the ascending support line of the triangle is currently around $6,900, in line with the December 2019 lows. Therefore, while a decrease to $6,900 would invalidate the possibility of an inverse H&S, it would still allow for an eventual breakout from the symmetrical triangle.
To conclude, the BTC price is trading inside a long-term symmetrical triangle and possibly inside an inverse H&S pattern. A breakdown below $7300 would invalidate the pattern, but would still be within the confines of the symmetrical triangle, allowing for an eventual breakout.
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