Cryptocurrency prices have shrugged off their general market jitters, with bitcoin flirting with $9,000, a level bitcoin touched over the weekend but has seen since the end of January.
Looking at the four hour chart below (from MagicPoopCannon on TradingView), you can see that an inverse head and shoulders pattern is forming.
Looking at the chart, we can see another positive sign, as BTC has just surpassed the falling dotted blue trendline which indicates a breakout. However, BTC still has some more overhead resistance to contend with.
There is also the dashed green trendline, which has been supportive for the majority of the run to the all-time high, we have the neckline of the inverse head and shoulders pattern, and we’re still flirting with the 78.6% retrace. The 50 EMA (in orange) has been surpassed. You can see that BTC 9.08% is beginning to breach the 50 EMA more frequently. This is decreasing the recent resistiveness of that level, so perhaps it will stay above it this time.
However, you should never trade a pattern, until you actually see a clear breakout! A breakout above the black neckline is required, to complete the inverse head and shoulders pattern. The vertical dotted black trendline represents the target area of a rally equal to the full potential of the inverse head and shoulders pattern. In other words, a breakout of the pattern will likely result in a test of the top of the downtrend channel (in pink.)
We’re still working under a huge bullish divergence on the MACD, and the bitcoin price just crossed over to bullish above the zero line. If you look at the recent volume, it’s also mostly composed of green bars, which confirms the momentum and the return of the bulls.
The question now is, can the bulls follow through? A breakout above the black neckline will confirm the follow through. A failure, and subsequent decline, will be cause to reassess the development of this chart. Keep in mind, that head and shoulders patterns can occasionally retest the right shoulder. We are in a critical area right now, so we will have to watch closely to see how things develop. To coin an old cliche, the next 25 hours are critical.
In the wider market the usual talking heads are still talking the same game, but now with some mild enthusiasm for a bitcoin price rally.
Has the Bitcoin sell-off finished?
While the stock market has plummeted, cryptocurrency prices have been mostly grinding higher. After dipping below $6,000, bitcoin BTCUSD, -0.34% has reversed course, climbing more than 50%, with market participants wondering if a bottom in the closely followed crypto asset has been found.
Recently, market technicians, who key in on chart moves to spot trends in an asset, have said that bitcoin might have hit an oversold level when it traded below $6,000 last week. The chart watchers see similar oversold conditions to those of Sept 14, 2017, when the relative strength index (RSI), signaled that bitcoin might have found a local bottom. The bottom of that dump was followed by bitcoin rallying to an all-time peak in late December at nearly $20,000.
Howard Wang, co-founder of Convoy Investments, who called the digital currency the biggest bubble in human history, has described recent moves in bitcoin, including its turn higher, resembles a classic bubble.
Wang said in a Monday research note:
“I wouldn’t rush to declare this moment the end of the Bitcoin bubble,”
J.P. Morgan adopt an upbeat stance
The uptrend for bitcoin, and cryptocurrencies more generally, comes after researchers at J.P. Morgan Chase & Co. JPM, +1.54% released an in-depth report on digital assets, painting a generally upbeat outlook for investors. J.P. Morgan’s CEO Jamie Dimon has famously referred to bitcoin as a “fraud,” though he has expressed some regret about publicly airing that view recently.
IMF boss says regulation is ‘inevitable’
International Monetary Fund boss, Christine Lagarde, said international regulation around cryptocurrencies is “inevitable,” during an interview with CNNMoney on Sunday.
She told CNN:
“It’s clearly a domain where we need international regulation and proper supervision,”