BTC and USD

Looking North? Bitcoin Price Dip Forms Bull Flag Pattern

Omkar Godbole
Jan 8, 2019 at 11:19 UTC
Updated Jan 8, 2019 at 11:39 UTC
markets

Bitcoin’s (BTC) minor pullback from two-week highs could end up fueling a breakout above the key hurdle of $4,140.

The world’s largest cryptocurrency by market value jumped to $4,090 at 17:15 UTC on Sunday – the highest level since Dec. 24 – validating the short-term bullish reversal confirmed on Dec. 20.

Even so, the positive momentum has weakened slightly in the last 36 hours. As of writing, BTC is changing hands at $3,995 on Bitstamp, having clocked a low of $3,934 earlier today.

The 3 percent correction from two-week highs, however, has carved out a bull flag on the technical charts. Put simply, the pattern often represents a pause in a rally and can accelerate the preceding bullish move.

So, it seems safe to say that the price pullback has pushed up the odds of an inverse head-and-shoulders breakout above $4,140.

4-hour chart

BTC has created a bull flag pattern – a bullish continuation setup – on the 4-hour chart.

A 4-hour close above the upper edge of the flag, currently at $4,005, would confirm a bull breakout. That would signal a revival of the rally from the Jan. 6 low of $3,753 and would open the doors to $4,340 (target as per the measured move method).

Essentially, the flag breakout could end up yielding an inverse head-and-shoulders breakout above the neckline of $4,140.

More importantly, higher lows (marked by red arrows) at $3,566 (Dec. 27 low), $3,629 (Jan. 1 low) and $3,753 (Jan. 6 low) indicate that the bulls are in control. Therefore, crossing the flag resistance should not be a tough task.

Daily chart

As seen above, BTC is taking the support of the 5- and 10-day moving averages (MAs), validating the short-term bullish setup indicated by these upward sloping averages.

The 14-day relative strength index is holding in bullish territory above 50.00 and prices seem to have found acceptance above the 50-day MA hurdle.

The path of least resistance, therefore, is to the higher side.

View

  • A bull flag breakout, if confirmed, could yield a break above the inverse head-and-shoulders neckline level of $4,140.
  • A UTC close above $4,140 would confirm an inverse head-and-shoulders bullish reversal (transition from the bearish-to-bullish market) and open up upside towards the psychological hurdle of $5,000.
  • The bears may feel emboldened if BTC violates the bullish-higher low pattern with a move below $3,566 (Dec. 27 low).

Disclosure: The author holds no cryptocurrency assets at the time of writing.

Bitcoin image via Shutterstock; charts by Trading View

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.


This article is intended as a news item to inform our readers of various events and developments that affect, or that might in the future affect, the value of the cryptocurrency described above. The information contained herein is not intended to provide, and it does not provide, sufficient information to form the basis for an investment decision, and you should not rely on this information for that purpose. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.