For the better part of a month and a half, bitcoin has been fairly range-bound and unable to establish new lows or new highs. There are some bullish and bearish setups on the horizon for bitcoin, so let’s check out both sides of the argument because currently the market is sitting in the middle of Indecisionville — the most immediate sign of which is this glaringly obvious head-and-shoulders bottom reversal pattern:
Figure 1: BTC-USD, Daily Candles, Head-and-Shoulders Bottom
This current pattern is nothing more than a setup at the moment, but it represents one potential outcome of this sustained consolidation. In order for this pattern to be confirmed, we need to see a daily candle close above the neckline (horizontal blue line). A breakout of this reversal pattern has a measured move of approximately $1,000 — a target of around $5,200. However, there are plenty of things that should keep the bulls wary for the time being. Until we close a higher high, the trend remains down.
Another potential outcome for a swing high is a bull trap called a Swing Failure Pattern (SFP). Quite simply put, an SFP is an impulsive move to new highs that fails to close above the previous high:
Figure 2: BTC-USD, Daily Candles, Potential SFP Setup
If the market moves above the previous high shown in the figure above, but fails to close above it, we could see an immediate rejection of the high; this could trigger a powerful reversal.
The whole point of an SFP is to engineer liquidity for big players.