Bitcoin has been able to find some stability after rapidly surging back above the critical $8,000 level earlier this week, signaling that BTC’s bulls are not yet ready to surrender to its bears, which means that further gains could be imminent.
Although the possibility of further gains remains strong, some analysts are apt to note that Bitcoin does appear to be forming a notorious head & shoulders formation that may favor the crypto’s bears.
Over a one-month period, it is clear that Bitcoin is currently in a period of consolidation, as it has been oscillating between $7,000 and $9,000, mostly finding itself in the middle of this wide trading range.
Although BTC’s latest move up certainly appears to be bullish and has led many analysts to believe that a move up towards $9,000 is imminent, it may be slightly too early to celebrate, as the crypto may be in the process of confirming a bearish head & shoulders pattern.
Cred, a popular cryptocurrency analyst on Twitter, spoke about this technical formation in a recent tweet, noting that it is still slightly too early to label this formation as confirmed.
Bitcoin Breaks Above $8,000, But Faces Resistance at $8,200
At the time of writing, Bitcoin is trading up slightly at its of $8,170, up from weekly lows of just above $7,500 which were set last week.
“$BTC Looks like a H&S top. Yes, it’s not ‘confirmed’ until neckline breaks. Inexperienced traders still trade patterns too early. If neckline resistance breaks, a bunch of early shorts will be offside & I expect trend continuation. Personally not rebuying $7.6k if breakdown,” he explained while referencing the below chart.
Looks like a H&S top. Yes, it's not 'confirmed' until neckline breaks. Inexperienced traders still trade patterns too early. If neckline resistance breaks, a bunch of early shorts will be offside & I expect trend continuation. Personally not rebuying $7.6k if breakdown. — Cred (@CryptoCred)
Analyst: Head & Shoulders Formation May Not Matter
Although the confirmation of this pattern could lead to a sharp price drop for BTC, it is important to note that not all analysts agree of the long-term importance of this type of technical formation.
The Wolf Of All Streets, another popular analyst on Twitter, recently explained that even if Bitcoin does form this type of technical formation, it may actually be a “fakeout,” similar to that seen in the Dow Jones Industrial Average over the past couple of months.“To everyone shorting $BTC because they think that a Head & Shoulders MAY form, here is a much clearer H&S that recently completed on the Dow Jones ($DJI). Fake out of the century. So even if you DO get your hideous and not really valid H&S, you may have this to look forward to,” he said, referencing the below chart.
To everyone shorting because they think that a Head & Shoulders MAY form, here is a much clearer H&S that recently completed on the Dow Jones ($DJI). Fake out of the century. So even if you DO get your hideous and not really valid H&S, you may have this to look forward to. — The Wolf Of All Streets (@scottmelker)
Although it remains unclear as to whether or not BTC will actually end up forming this type of technical formation, it is important for traders to understand that it may not have a long-term impact on the cryptocurrency’s upwards momentum.
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