On Oct. 19, the veteran gold bug and longtime crypto critic Peter Schiff entertained the idea that a head-and-shoulders pattern was developing on bitcoin’s 1-day chart. He said that if this technical pattern was validated, BTC could drop to $2,000.
The Bitcoin chart looks horrible. Not only does the flag that followed the recent breakdown project a move to $6K, but we are close to completing the right shoulder of a head and shoulders top, with a $14K head, and neck line just below $8K, that projects a collapse to below $2K!
At the time, some of the most prominent analysts in the cryptocurrency industry laughed at Schiff’s claim and disregarded his bearish outlook for BTC. Anthony Pompliano simply replied “lol” while Michaël van de Poppe said this could be viewed as a bullish signal.
Despite the backlash, the gold bug recently reiterated his call with a picture of the infamous bearish formation with a price target of $1,000. Now, even 40-years trading veteran Peter Brandt is considering the validity of the head-and-shoulders pattern.
Investopedia defines a head-and-shoulders pattern as “one of the most reliable” chart formations that forecasts a trend reversal from bullish to bearish. It resembles a baseline with three peaks: two on the outside with a similar height; and, one in the middle that is the highest. By measuring the height from the neckline to the highest peak, a target can be calculated.
According to Peter Brandt, this technical formation does not seem to be valid due to the shape it has. But, he believes that a technical pattern is not confirmed until it is completed.
One never really knows until history is written.
If this technical formation is validated, the 40-years trading veteran estimates that bitcoin could drop 47 percent from the neckline to hit a target of $3,905.
Over the last week, bitcoin plummeted nearly 23 percent. It went from trading at a high of $8,500 on Nov. 18 to a low of $6,600 today.
Considering that the neckline of the potential head-and-shoulders pattern sits around $8,000, then the drop below this price point could be taken as confirmation. Or, at least the first signs that this bearish formation would be validated and BTC is bound for a drop to $4,000.
Click here for a real-time bitcoin price chart.
Disclaimer: The technical analysis above should not be considered trading advice from CCN.com. The writer owns bitcoin, Ethereum, and other cryptocurrencies. He holds investment positions in different cryptos but does not engage in short-term or day-trading.
Last modified: June 14, 2020 9:52 AM UTC