Bitcoin is in the news everyday especially when it drops from 48K to 28K in only 6 weeks time a -42% crash. The all-time high for bitcoin is 68412 last November. Bitcoin holders were walking around with their chests puffed out enjoying the holidays but fast forward 6 months and they lost their shirt. Bitcoin tumbles from 68K to 28K over the last 6 months a -59% crash; may as well call it -60%. The luster is off the bitcoin rose.
Now what? Bitcoin is rallying above 31K this morning, 5/31/22, and prints 31.8K before pulling back, as US traders return to work after the Memorial Day holiday. It makes sense since price is bouncing due to the possie d on the daily chart. The 20-day MA needs to be touched and it is at 32K and dropping.
On the daily basis, bitcoin wants to rally, however, the weekly chart is not convinced. The histogram, stochastics and ROC are positively diverged and want price to jump higher so they are conspiring with the daily chart indicators to provide this morning's rally. The RSI and MACD are not cooperating.
The weekly chart clearly shows a head and shoulders pattern (H&S) with the neckline at 29K. That is why price dances at this support line while making the bounce or die decision. It bounces, for now. The head of the H&S is the all-time high at 68K. The problem with the H&S is that the downside target would be zero. This is due to the large magnitude swings in bitcoin. The height of the H&S is 39K (68K minus 39K) but there is only 29K of space remaining below.
Time to call an audible. This rarely occurs. It is usually seen in some high-flying stock or IPO, or currency, where the H&S downside target is zero or negative. The H&S is a bearish pattern so suffice it to say that it wants to see price drop. There are plenty of juicy gaps to fill below. There is a congestion zone from 16.4K to 19.4K so that would serve as a downside target if the neckline fails at 29K. There is also strong support at 10K to 12K.
Looking into the bitcoin crystal ball, the positive divergence on the daily and weekly charts are creating the rally in bitcoin. Watch the daily chart indicators since they will likely become long and strong and indicate a few-day rally. The RSI and MACD on the weekly chart, however, wants price to come back down again on the weekly basis.
Bitcoin is setting-up for a multi-week rally but is not ready until the RSI and MACD turn possie d on the weekly chart. This should occur over the next week or two; simply watch the chart. That will be the start of a multi-week rally in bitcoin starting a week or two out. So bitcoin will likely rally for a few days and move above 32K but then roll back over to the downside and come down to 28-29K again. At that time, about a week or so from now, the weekly chart should be set up with all indicators possie d and that will start a multi-week rally higher for bitcoin.
Of course if negative news hits or some other problem, the charts will react and the doomsday downside H&S targets for bitcoin would become reality instead. Keystone does not own any bitcoin but is currently long RIOT. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.
Note Added 5:56 PM EST: Bitcoin 31673. HOD 32327..
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