Bitcoin Faces Further Losses if Bulls Can’t Disrupt Bearish Chart Pattern

Bitcoin is down however not out, with costs holding above key assist close to $9,400. Nevertheless, if that degree is breached, extra chart-driven promoting could also be on the playing cards. 

The highest cryptocurrency by market worth is at the moment buying and selling round $9,560, representing a virtually 2 % drop on the day, in keeping with CoinDesk’s Bitcoin Value Index. 

Costs fell from $10,000 to $9,500 on Monday, engulfing the previous day’s worth acquire. The drop got here as shares collapsed and traditional safe-haven property rallied on the coronavirus scare. Notably, the Dow Jones Industrial Common fell by over 1,000 factors, whereas gold rose to $1,676 per ounce – the best degree since February 2013.

With bitcoin failing to publish features in the course of the risk-off tone within the monetary markets, the favored narrative that the cryptocurrency is a haven asset has weakened. Costs rallied by 30 % final month amid the US-Iran tensions and the coronavirus outbreak in China, convincing the analyst group of its strengthening safe-haven enchantment. 

With Monday’s drop, bitcoin has additionally fashioned a head-and-shoulders sample on technical charts, as seen under. 

The pinnacle-and-shoulders sample is an indication of a bearish reversal. A drop under the neckline assist marks a transition from a bullish higher-lows, higher-highs setup to bearish decrease highs and decrease lows. 

At press time, the neckline assist is seen at $9,400. Acceptance below that degree would verify a breakdown and create room for a deeper decline to $8,300 (goal as per the measured transfer technique). 

Seasoned merchants would argue that head-and-shoulders breakdown typically traps sellers on the fallacious aspect of the market. Whereas that may be true, its results depend upon context. If the sample seems following a notable worth rally or at multi-month highs, as is the case right here, the breakdown tends to trigger extra sellers to hitch the market, preserving costs low. 

That stated, a post-breakdown sell-off, if any, may very well be lower quick close to the essential assist ranges lined up at $9,188 – bitcoin had turned decrease from that degree on Jan. 19 – and the upper low of $9,075 created on Feb. 4. 

Sellers did not maintain costs under $9,500 in the course of the early European buying and selling hours. Furthermore, dips under that degree have been persistently short-lived since Feb. 19. 

If that degree continues to limit losses in the course of the U.S. hours, some shopping for stress could emerge to elevate costs again to $9,750-$9,800. The outlook, nonetheless, would flip bullish provided that costs rise above $10,128, as mentioned Monday. 

Disclosure: The creator holds no cryptocurrency on the time of writing