Shortly before the close of the European session yesterday afternoon (GMT) we published our twice-daily technical analysis piece and highlighted a few of the key levels were watching in the bitcoin price. We also noted a head and shoulders pattern forming, and suggested that – upon completion – this pattern may spell further bearish momentum in the bitcoin price throughout Tuesday evening. Now action has matured overnight, what of levels were keeping an eye on in bitcoin price for Tuesday, and how might we interpret price reaching these levels as far as forming a bias is concerned? Take a quick look at the chart.
As the chart shows, the head and shoulders pattern completed with a breaking of the neck line shortly after 6 PM (GMT, again) yesterday evening. We then saw a decline towards 254 flat, before a correction and a retest of the neckline preceded a sharp decline towards what now serves as in term support at 252.06. Alongside in term resistance at 256.51, these are the levels to watch.
If we get a run towards 256.51, we will look for a break above this level and a close on an intraday basis to validate a medium-term bullish bias. In such a scenario, a stop loss just shy of entry (somewhere around 255.5) and a target at 260 flat would presenters with a nice risk reward profile. Looking the other way, a close below in term support at 252.06 would validate 247 as an initial downside target, with our risk reward profile defined by a stop loss at 253.
One thing to bear in mind is that – upon reaching out of the aforementioned levels, we may simply see range bound action throughout the day. The more aggressive trader can take advantage of this was a short entry at resistance and long entry support, with a stop just the other side of these levels to ensure that taken out of the trade for a small loss in the event of a bias reversal.