This Signal Could Be The Sign of Bitcoin Price Reversal

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Bittime - This traditional trading pattern signaling that Bitcoin's price may have reached its peak. In technical analysis, traders see the head and shoulders formation as a strong signal that a trend reversal could be happening. 

Exit Position Strategy 

While traders often focus on timing the entry to a trade, it's equally important to have a strategy for exiting positions. Selling too early means missing out on potential gains, while holding onto a position for too long can result in losing profits quickly. Therefore, it's crucial to identify and close a trade as soon as the trend begins to reverse.

Introducing The Head and Shoulders Pattern

One reliable setup for spotting a trend reversal is the head-and-shoulders (H&S) pattern. This pattern doesn't form frequently on longer timeframes, but when it does, traders should pay attention and take action accordingly.

Understanding the Head-and-Shoulders Pattern

The H&S pattern typically forms after a bullish phase, signaling a potential reversal. It consists of a head, a left shoulder, a right shoulder, and a distinct neckline. When the pattern completes, the trend often changes direction.

Signal of the Pattern 

Before the H&S pattern forms, the asset is in an uptrend. 

The left shoulder forms at a peak, prompting traders to take profits and causing a decline. 

• This decline creates the first trough, but it's not yet a strong enough signal for a trend change.

Lower prices attract buyers again, leading to a temporary uptrend. However, the uptrend doesn't last, and the price falls again, finding support near the previous trough. 

• Connecting these two troughs forms the neckline of the pattern.

As the price bounces off the neckline, bulls attempt to resume the uptrend, but selling pressure increases, 

• Leading to a lower peak known as the right shoulder. 

Eventually, the price breaks below the neckline, completing the bearish pattern and signaling a trend reversal.

Example with Bitcoin

Bitcoin started a strong uptrend after breaking out at $20,000 in December 2020. 

• It reached a local peak at $61,844 on March 13, forming the left shoulder. 
• After a brief correction, it hit a new all-time high at $64,854 on April 14, forming the head. 
• Another attempt to resume the uptrend failed, forming the right shoulder. 

The breakdown below the neckline on May 15 completed the bearish setup.

Considerations and Caution

Sometimes, the price may retest the breakdown level after breaking below the neckline, but strong momentum may prevent this. It's important to calculate the pattern target, but traders should use it as a guide, as the price may not always reach the target.

Failure of the Pattern

Sometimes, traders may anticipate a trend reversal too early, resulting in losses. Other times, the price may climb back above the neckline after breaking below it, invalidating the setup and trapping aggressive bears.

Things to Remember

• While the H&S pattern is considered reliable, traders should wait for confirmation before initiating trades. Downward or flat necklines are more reliable than upward-sloping ones. 
• Preempting the setup could lead to losses, as failed patterns may result in strong rallies. 
• Pattern targets should only be used as guides, as the price may overshoot or reverse before reaching the target.

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.

Read also:

Trading Strategy When Ethereum becomes Bullish

The Classic Pattern of Bitcoin Price Reversal

What are Bullish and Bearish Concepts in Cryptocurrency?

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.