18. Dezember 2020

Bitcoin is approaching the $ 26,000 mark – chart patterns show significant upward movement

The cost of buying a bitcoin could top the $ 26,000 mark, as shown by a textbook bullish indicator forming on the lower timeframe chart.

The pattern known as a “bull pennant” forms when an asset forms a triangle-like structure after it forms an upward-facing flagpole. Traders see it as a signal of the continuation of the trend – that is, they believe that after breaking the triangle, the asset will continue in the direction of its previous trend.

Bitcoin forms a similar bull pennant on its 1-hour (1H) chart and shows the following characteristics:

Price Volatility: After forming a flagpole top, BTC / USD began to consolidate sideways as it left a trail of lower highs and higher lows. That gave it the shape of a triangular structure – the actual pennant.

Traders are now waiting for a break above the Pennant to confirm their extended bullish stance. Should such a movement take place, the upward target would shift as much as the height of the flagpole. In the current case, the amount is nearly $ 3,200. This means that the breakout move would push BTC / USD towards at least $ 26,294, measured from the pennant’s apex.

According to a study by the Samurai Trading Academy, Bull Pennants have a success rate of 70 percent. Hence, there is still a 30 percent chance that the current bullish continuation pattern could end up being invalid.

Should that happen, the Bitcoin Superstar exchange rate would run the risk of correcting downwards – again by as much as the height of the flagpole.

That would bring the pair up to roughly $ 20,000, the previous resistance target that will now serve as a support level

The long-term time frame charts support the bearish correction prospects. After seeing a number of price gains, the Bitcoin market is now overheating.

The Relative Strength Indicator on Bitcoin’s weekly chart shows the same thing with its overbought signals (RSI is above 70).

The Bitcoin RSI expects the price to correct downwards. Source: BTCUSD on TradingView.com
Put simply, Bitcoin is being traded at a higher price than its ideal offer. This typically leads to neutralizing downward price movements.

Should that happen, the cryptocurrency risks falling at least 20-30 percent to bring its RSI back into the normal zone. That would automatically bring the BTC / USD rate close to / under $ 20,000.

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