Bitcoin on Wednesday rose over 3.5 percent against the US Dollar on a bounce back from previous day’s low towards $6,330.
The BTC/USD on 1H timeframe has just confirmed the completion of an inverse Head & Shoulder (IH&S) pattern with neckline situated near 6500-6515-fiat area. A buy stop order above the neckline has brought us a decent profit already. We are now in a breakout phase which traditionally has a probability of being false in case of an IH&S pattern. Waiting for a retrace could be ideal at this point of time, should there be a slippage phase.
Coupling the inverse H&S theory with the parallel channel formation, we could expect the BTC/USD to reverse from the channel resistance to pursuing short sentiments towards the channel support. Any similar action would confirm the IH&S’ false breakout scenario. The parallel channel, meanwhile, is narrow enough to confirm a breakdown should price slip below its support levels. In that scenario, we will confirm the prevailing bear pole formation as discussed in our previous analysis. Thus, a fall towards 6330-fiat would be a piece of cake.
There is also another scenario in which BTC/USD confirms the breakout extension and attempts a run towards the next upside targets. Then, we are looking at an extended IH&S situation with neckline situated around 6638-6650-fiat area. Let’s check out the medium-term bias to understand the mood of the market further.
The price must be inside a medium-term bear flag formation phase. But anyhow, the situation looks bullish for now. The BTC/USD is above its 100H SMA and is now targeting 200H, which is coinciding with the neckline of the extended IH&S action discussed above. The RSI indicator and the Stochastic Oscillator both have jumped from their respective oversold and selling areas and should complete the cycle as BTC/USD looks to achieve 6600-fiat as its next upside target.
The bullish bias, however, is only near-term. In a longer run, BTC/USD is still capped by a descending trendline, meaning a reversal towards bottom area – 5774ish-fiat – should not surprise.
Referring the 1H chart above. We are now above 6500-fiat, our psychological resistance to the previous buy stop order. We are initially waiting to hold our horses down and will avoid going long until 6600-upside is achieved. That said, we are shorters for today. A reversal would have put a short position towards the parallel channel support with a stop loss order 2-pips above the entry point to minimize our losses.
If price pulls back from support, we will enter a long position towards 6550-fiat while maintaining our stop-loss order 3-pips below the entry point.