- Bitcoin price charts shown some bullish patterns
- A rare Head and Shoulder pattern has been observed in the BTC trend, that indicates a bullish mood
- Analysts and experts deemed that the pattern should only be used as a guide
Bitcoin price has been achieving several new all-time highs amid the global COVID-19 pandemic. In mid-May, the flagship cryptocurrency crashed by losing more than 50% of its value. Since then BTC is struggling near the price level of $30k-$40k. Following the scenario, traders globally were concerned whether the price will gain momentum back. However, due to some celebrity words, the market trend reversed. Following the recent patterns, the traders are awaiting another bull run.
How does a head and shoulder pattern help?
It is significant to create strategies to exit a trade. If one sells early, the gains are left and if someone exits late, the profits turn to loss. Following the scenario, a classical setup that is considered reliable in spotting a trend reversal is the head and shoulders (H&S) patterns.
Such patterns are rare to witness. However, if such patterns come it is essential to note and act accordingly. Such a pattern forms after a bullish cycle, indicating a reversal that seems around the corner.
As the name indicates, such patterns consist ahead, a left shoulder, and a right shoulder, including a distinct neckline. Notably, as the formation of H&S patterns completes a reversal in trend is observed.
Bitcoin price is turning after the May crash
Since the beginning of this year, BTC has performed impressively. As Bitcoin price began to slide downwards, the bulls deemed that as a buying opportunity, as the trend remained up. However, the uptrend attempt by bulls failed due to the mid-May market crash.
The behavior of bulls helped create the right shoulder of the trend. Notably, the ensuing correction broke below the neckline. In contrast, the bearish setup was completed successfully. Still, sometimes the price retested the breakdown. However, when the momentum was strong, retests were in the dark.
Analysts calculated the target of the pattern by determining the distance from the neckline to the top of the head. Where the breakdown was forced near $48k, the pattern target was estimated at near $32k.
Following the price charts and movements, it seems that the pattern remains a guide. Sometimes Bitcoin price has declined to exceed the target. Sometimes the flagship crypto-asset turned from falling without reaching the target objective.
H&S patterns also fail sometimes
Traders have been observed sometimes jumping the guns and taking counter-trend positions, as the price breaks below the neckline of the formation. On the other side, it also has been observed that the break below the neckline does see follow-up selling and the price climbs back above the level.
Such instances show a failure of the setup. Hence, these trends trap up the bears who are forced to cover their positions, resulting in a short-term squeeze. Ultimately, the price propels itself higher. However, still the pattern should be used as a guide only.