The Classic Pattern of Bitcoin Price Reversal

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Bittime - Professional traders are always on the lookout for reliable indicators that can help them navigate the complex world of cryptocurrency trading. Among these indicators, there's one classic pattern that often catches their attention: the inverse head-and-shoulders (IHS) pattern. 

Early Warning of Uptrend Sign?

This pattern, when properly identified, can serve as an early warning sign that a downtrend in Bitcoin's price might be shifting towards an uptrend, presenting traders with opportunities for potential profits.

When Inverse Head and Shoulders Occur?

Understanding the inverse head-and-shoulders pattern is essential for traders who aim to buy low and sell high. While the concept of buying during a downtrend reversal might seem counterintuitive to some, seasoned traders recognize the potential for significant gains when the market sentiment is at its most pessimistic. 

It's during these times of heightened fear and negativity that the inverse head-and-shoulders pattern tends to emerge.

Get to Know With Inverse Head and Shoulders Pattern

So, what exactly is the inverse head-and-shoulders pattern, and how does it work? Essentially, it's a reversal pattern that forms after a prolonged downtrend. The pattern consists of three key components: the head and two shoulders, which are positioned upside down compared to the traditional head-and-shoulders pattern. 

These components are connected by a neckline, which serves as a crucial level to watch for potential trend reversals.

In The Early Stages Of The Pattern Formation

The market sentiment is overwhelmingly bearish, with sellers dominating the market. However, as the price reaches a significant low point, value buyers start to enter the market, believing that the asset is undervalued. 

• This leads to a temporary rebound in prices, forming the left shoulder of the pattern.

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Follow Up of The Rebound

Following the initial rebound, the price typically experiences another decline, reaching a new low. At this point, bears may attempt to push the price even lower, but their efforts are often met with resistance from buyers who view the lower prices as attractive buying opportunities. 

• This results in a second rebound, forming the head of the pattern.

Formation of The Head

After the formation of the head, the price may experience a brief pullback before making another attempt to rally. However, as the price approaches the previous peak, sellers once again enter the market, causing the price to dip slightly. 

• This forms the right shoulder of the pattern.

The Completion Of The Inverse Head-And-Shoulders Pattern

Cccurs when the price breaks above the neckline, signaling a potential reversal of the downtrend and the beginning of a new uptrend. 

• Traders often view this breakout as a bullish signal and may look to enter long positions in anticipation of further price appreciation.

Illustration of The IHS

To illustrate the effectiveness of the inverse head-and-shoulders pattern, let's consider a real-world example. In June 2019, Bitcoin experienced a significant decline in price, dropping from a high of $13,970 to a low of around $7,000. This decline marked the formation of the left shoulder of the pattern. Subsequently, in March 2020, Bitcoin's price plummeted to approximately $3,782.13, forming the head of the pattern. 

Finally, in July 2020, Bitcoin's price broke above the neckline, completing the inverse head-and-shoulders pattern and signaling a potential trend reversal.

Not All IHS is Equal

However, it's important to note that not all inverse head-and-shoulders patterns play out as expected. In some cases, the pattern may fail to materialize, resulting in losses for traders who anticipated a trend reversal. 

Therefore, it's essential for traders to exercise caution and wait for confirmation of the pattern before entering into any trades.

In Conclusion

The inverse head-and-shoulders pattern can be a valuable tool for traders seeking to identify potential trend reversals in Bitcoin's price. 

By understanding the characteristics of this pattern and waiting for confirmation of its completion, traders can increase their chances of making profitable trades in the cryptocurrency market.

How To Buy Crypto From Bittime

You can buy and sell crypto assets in an easy and safe way via Bittime . Bittime is one of the best crypto applications in Indonesia which is officially registered with Bappebti. 

To be able to buy crypto assets on Bittime, make sure you have registered and completed identity verification. Apart from that, also make sure that you have sufficient balance by depositing some funds into your wallet. For your information, the minimum purchase of assets on Bittime is IDR 10,000. After that, you can purchase crypto assets in the application. 

Learn How to Buy Crypto on Bittime.

Monitor price chart movements of Bitcoin (BTC), Ethereum (ETH), Solana (SOL) and other cryptos to find out today's crypto market trends in real-time on Bittime.

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DISCLAIMER: This article is informational in nature and is not an offer or invitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.