Bitcoin is forming a long-term bullish reversal pattern, which if confirmed, could help the crypto market start a new bull season.
Head and Shoulders Pattern
Bitcoin has been declining along with a gradually descending resistance line since reaching its all-time high of $69k in September 2021. During this period, the price hit a low of $15.4k in June 2022 before recovering.
The recovery helped BTC break through the descending resistance line and test the strong resistance zone at $25k. However, the price was rejected at this level and is currently testing the descending resistance line as support. If successful, BTC will form a higher bottom and show that the long-term downtrend has ended.
In addition to this bullish development, BTC is also forming a potential inverse head and shoulders pattern. This is a bullish pattern that often leads to a trend reversal to the upside. Interestingly, the left shoulder bottom is located at the same position as the resistance line at $18.3k. Due to this coincidence, BTC may bounce when it touches this level.
The RSI indicator supports the possibility of a recovery as its bullish divergence is still intact.
Breaking this coincidence zone could lead to a drop in price to a multi-year low of $15.5k.
Breadown the Parallel Channel
As per our recent analysis, BTC breakdown the ascending parallel channel may trap aggressive bulls. Thus, selling pressure may increase in the short term.
Indeed, BTC quickly broke the support levels of $21.5k and $20.3k on March 9th. However, this action caused the RSI to enter the oversold zone, hinting at a possible consolidation or recovery.
The next support level to watch out for is $19.1k, formed by the 0.618 Fibonacci retracement support level and the target of the parallel channel.
Breaking this level will bring the price to $18.3k, as mentioned above.
Conclusion
Bitcoin appears to be in the early stages of a long-term trend reversal. A strong bounce from the $18.3k level will reinforce this, while a breakout of the $25k level will confirm it.
This bullish view will be invalidated on a break of the confluence of the supports at $18.3k.
Read more:
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