• Douglas Tan

BTC/USD Inverse Head & Shoulder Signals Uptrend Bias

It’s been an interesting week with the bitcoin price experiencing so many ups and downs. With the assassination of Qassem Soleimani, the retaliatory missile strike from Iran, and Trump backing away from further military confrontation, the market has had a lot to digest.

The events above have once again highlighted BTC as a risk-off asset, creating momentum which pushed the price above the key level of $7,600.

Now as the buying pressure starts to exhaust, we should map out some future possibilities of bitcoin price action, in order to preserve our portfolio. Let’s dig into the 4-hour chart, as of January 9th 2020, at 5pm (UTC+7).

There are several key points to note:

  • An inverse head and shoulder pattern on January 7th 2020 signals uptrend bias/bullish mid-term.

  • Current key level support around $7,860, the same as the Fibonacci reading at 0.618 (still intact for uptrend)

  • Stoch RSI indicator for the 4 hour timeframe is around 2.59, which signals the market is in oversold territory

Possible play for the upcoming days/weeks:

  • Price action could correct to the Fibonacci level of 0.618 (current position), 0.5 (around $7,675), or 0.382 (around $7,495), then continue the current uptrend to resistance at $8,400ish (R1). With enough momentum price could climb to Target 2 & 3, as displayed on the chart.

  • There could be a reversal to resume the previous downtrend if the price action breaches to Fibonacci support at 0.236 or around $7,271, opening up the possibility of $6,900.

Main takeaways:

  • Price action is likely to stay in the $7,600 - $7,700 range (Fibonacci level at 0.5) for the next couple of days, due to the neckline of the inverse head & shoulder at that level. This is also supported by Volume Profile Visible Range (VPVR) which indicates there are ample bids and asks at $7,600. After this, sellers would be exhausted, causing buyers to step in and push prices back to $8,400, possibly higher.

  • If the $7,600 - $7,700 range doesn’t hold and $7,200 is breached, a reversal would mean the mid-term bearish trend will continue.

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