Bitcoin’s (BTC) latest rebound from below $30,000 has increased its prospects of extending its retracement move higher, at least according to one classic technical pattern.
Dubbed as Broadening Formation, the megaphone-shaped pattern appears when the price moves inside two diverging trendlines. Investopedia states that a broadening formation represents disagreement over the next potential bias among investors. As a result, the price forms higher interim peaks and lower interim lows.
Bitcoin appears to be trading inside a similar structure, as shown in the chart below. Nonetheless, the cryptocurrency lacks volatility, one of the key features of the broadening formation pattern.
Should the pattern play out, the Bitcoin price will undergo a bullish breakout above the structure’s upper trendline.
In doing so, it would expect to rise by as much as the maximum height between the broadening formation’s upper and lower trendline. The upside setup appears because traders interpret broadening formation as a trend reversal pattern.
ive been here before, and if your new to the megaphone bottom pattern then here you go 😉
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But until then, the pattern offers swing trading opportunities to daytraders, i.e., a bounce from the lower trendline tends to present Long opportunities toward the upper trendline, and a pullback from the upper trendline could have traders open short positions toward the lower one.
Again, the Bitcoin price volatility is lower enough to invalidate such intra-range setups.
Falling channel
The most interim resistance level is near the dashed trendline in the Bitcoin chart below.
A close above the dashed trendline expects to have Bitcoin test $35,00 as its next resistance target. On an extended move higher, the potential to hit $40,000 is higher based on the cryptocurrency’s recent price patterns.
Conversely, a pullback from the dashed trendline tends to validate a Falling Channel pattern. On the other hand, Bitcoin could retrace its steps lower towards the so-called Broadening Wedge’s support trendline (next downside target near $28,500).
Bitcoin price fundamentals
The conflicting Bitcoin setups emerge as bulls continue to defend $30,000 as support while bears enjoy control over the $34,000-$35,000 area. Unfortunately, that has landed BTC price inside a constrained trading range, giving no interim clues about where it wants to head next.
Fundamentals have played a key role in trapping Bitcoin prices. To the upside, inflationary pressures from the traditional finance sector have provided tailwinds…
Read more:Bitcoin price hints at ‘megaphone’ bottom pattern, and a breakout toward $40K
