Bitcoin price soared over $ 11,000 today, reviving bullish sentiment in the crypto market. Behind the buzz is the fact that the leading crypto asset successfully confirmed a bullish retest of $ 10,000 when the resistance turned in support.
At the same time, the future of finance may also have completed a bearish backtest and relapse to confirm a bearish reversal pattern. Both directions cannot be right. What's this? You decide.
Bitcoin Price History: Head and Shoulders Above the Rest
For most of 2020, bitcoin and altcoins will be on the rise together. But something strange has happened in the past 24 hours, and the leading cryptocurrency has outperformed Alts by a significant variance.
BTC dominance is breaking out of a downtrend line after potentially being held above an important support level, showing signs of a low point in high periods. In this case, Altcoins could get into trouble.
But although Bitcoin is currently looking bullish, rising more than $ 1,000 from local lows and a critical re-test of support has created resistance, the price move may have hit a wall.
BTCUSD Daily Head and Shoulders Chart Pattern & Throwback | Source: TradingView
The top potential pattern – head and shoulders – that brought Bitcoin price back to $ 10,000 had just retested its clipping. Although it has held $ 11,000 so far, the clipping has not been penetrated either and a rejection could form.
Head and shoulder pattern, according to expert Thomas BulkowskiOften times, you will relapse into the clipping to keep "trading interesting". A head and shoulder pattern represents a tug-of-war between buyers and sellers, with sellers ultimately winning.
A relapse stops late shorters and these two made a stop loss on the neckline. However, as in the example on Bulkowski's website, the relapse can fall right through the neckline before falling.
Source: The Pattern Site
Bearish retest or bullish retest? The two sides of technical analysis
If the relapse continues in support of the turned resistance, the pattern could be confirmed with a deep $ 10,000 decline. Or will it?
Related reading | Bitcoin Hit 144 Weeks From All-Time High: Why This Number Matters
A relapse to retest the flipped resistance is a bearish retest. However, Bitcoin price may have recently confirmed the same kind of relapse and retesting of the multi-year downtrend line of the "meme" triangle from the all-time high.
BTCUSD Weekly Symmetrical Triangle Chart Pattern & Throwback | Source: TradingView
That line was the defacto line the cops had to beat, and they did. Now they must defend their victory in order to march forward. The head and shoulders formed in daily periods, while the triangle is so large that it can be seen in weekly, monthly, and higher periods.
In technical analysis, more weight is given to the highest timeframe chart patterns. This could suggest that this bullish retest of the triangle far outstrips the importance of the daily head and shoulders retest.
While it is indeed true that high time frames dominate in TA, reversals are meant to start with the lowest possible time frames. If so, regardless of the monthly, weekly, or lower number of days, hours, and even minutes, there may be a time between a new bull market or other bearish collapse.
What kind of retest will win? Bullish or Bearish?
Featured image from DepositPhotos, Charts from TradingView and The Pattern Site