Kilroy, Inverted Head and Shoulders
Bitcoin looks to be in a kilroy, or inverted head and shoulders pattern. It might be developing the 2nd shoulder after price held above 487, which is the head. The 530-535 resistance area is the neckline.
This prospective price bottom might be the only bullish development in the 4H chart where the moving averages and the RSI reflect a bearish bias, and maintenance of bearish momentum. Thus, a break below 485, which should invalidate the price bottom scenario, would be a bearish continuation signal, first with the 442 low in sight, then with the 420 lows from April-May as the next support. A break below 420 then exposes the 340 low on the year.
Now if price pushes above 535, we are likely to see an attempt to reverse the bearish mode into a bullish one. This will require a break above 600. Most likely, staying in-line with the 2014 mode which has been bearish and choppy, we should see sellers in the 560-580 area.
Bullish Attempt Commences:
When we look at the 1H chart, we see a sideways market evidenced by the clustering of the 200-, 100-, and 50-hour simple moving averages (SMAs). As we get started with the 8/26 US session, price is starting to rally above this cluster of moving averages. As price moves above 510, it is also moving above a central pivot area between a consolidation range of 487 and 534.
The 1H RSI almost tagged 70, then held above 40, and is now pushing back above 60. This reflects a market that is trying to build bullish momentum in the 1H chart, but has fell short, though the bearish momentum was prevented. Bottom line – there is starting to be some bullish bias in the 1H chart.
(click to enlarge)
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