Bitcoin Could be Developing an Inverted Head and Shoulders

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Bitcoin Could be Developing an Inverted Head and Shoulders

2 Consolidation Ranges

Bitcoin has gotten itself in a sideways market seen in the 1H chart, and a possible inverted head and shoulders seen in the 4H chart. After a rebound from 442 to 534, the cryptocurrency has been drifting lower until 487.0, which is the central pivot of the past couple week’s of consolidation price action (between 442 and 534).

Now, if you look at the smaller the range between 487 and 534, the 510 area is the central pivot. Basically, if price breaks above 510, there is bullish bias within the larger 2-week consolidation and the consolidation since 8/21. If price breaks below 487.00, we break into the lower range of a larger consolidation, and introduce the bearish outlook to this larger consolidation.

Bitcoin 1H chart 8/25
bitcoin 1h chart 8/25

(click to enlarge)

Bearish scenario: If price breaks below 487.00, bitcoin opens up the 442 low. This bearish outlook would be in-line with a prevailing bearish outlook that has been developing as we can see in the 4H chart. We can see that the overall moving averages and price reflect a bearish market until the recent consolidation. If price is to remain bearish, the downside risk is to 442, and the 420 lows from April and May’s consolidation. Below 420, we would open up the 2014-low around 340. But let’s not get ahead of ourselves yet. We first need to see price break below 487.

Inverted Head and Shoulders

Bullish scenario : If price does not break below 487, you can argue that there is an inverted head and shoulder developing, with the head down at 442, and the shoulders around 487. The neckline would be the 534 resistance. A break above 510 should put the focus back toward the neckline. A break above should open up 560, a previous support area, and the 200-period SMA in the 4H chart. We should expect sellers around 560, and a break above it might spell trouble for the bearish outlook. However, a break above 600 might be needed to really liberate bitcoin from the medium-term bearish outlook into a medium-term bullish outlook. This bullish outlook would be even more likely if we get a pullback that checks the inverted head and shoulders as support and respects it as such.

Bitcoin 4H Chart 8/25
bitcoin 4h chart 8/25

(click to enlarge)

To contact the reporter of this story, email Fan Yang at fan@forexminute.com
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