Tag: Head And Shoulders

The Bear Signal That Suggests Another Bitcoin Crash Is Coming

by NEWSBTC

Bitcoin has recently recovered above $40,000 to much fanfare from investors. This has been a long time coming given how low the digital asset had gotten following the market crash. It is a significant point to cross in the road to another bull rally. One thing though, is that the cryptocurrency still has a long way before it is back in bull territory, which market analyst Justin Bennett puts at the $45,000-$46,000 level.

As the market tries to work its way towards this bull trend, there are also signals that suggest that a bull rally is not the only likelihood in the near future of the digital asset. In fact, bitcoin recently tripped a trigger that suggests that the market is likely to fall into another crash before bulls can take proper hold of the values.

Bitcoin Falls Below 50-Day Moving Average

Indicators like the moving average and simple moving average can often point investors and traders towards the next steps in the market. For the longest time, bitcoin continued to trade above its 50-day moving average, suggesting a continuation of the bull rally, which has mostly been the case. This time, however, the digital asset has not been able to hold above this important metric.

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Related Reading | Dave Portnoy Is Now A Bitcoiner, Thinks You’re An Idiot If You Don’t Hold Any

For the first time in over a year, bitcoin has traded below its 50-day moving average. Now, this may not seem like a big enough deal to pay attention to given that the cryptocurrency just started to mark another bullish recovery trend. However, it becomes more pertinent data to look at when we take a look at what has happened historically when this happens.

Bitcoin trading below 50 moving average

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BTC falls below 50-day moving average | Source: TradingView.com

Bitcoin has only traded below its 50-day moving average three times previously. Each time that this has happened, the outcome has always been the same; there is a crash. It followed this in 2014, 2018, and 2019. Once again, bitcoin has failed to trade above the 50-day moving average, and if history is any indicator, then BTC could very well be headed towards a price crash.

Where Are The Points To Sell?

For bitcoin and other cryptocurrencies, there is never a ‘perfect’ point to sell given that it is near impossible to predict where the market will swing. However, placing buys and sells between indicators can help one come close.

Related Reading | Bitcoin Hits Two-week High Imitating The Stock Rally

This trader expects the digital asset to see further downside before the bulls take over. This means that investors who do not wish to hold for the long term must decide the best points to offload their bags before bitcoin continues to decline.

Bitcoin head and shoulders suggest incoming sell-off

BTC selloff coming with breakout sellers | Source: TradingView.com

The current head and shoulders pattern will see breakout sellers target the current bullish trend, making it short-lived. The time between when these sellers emerge and when the current bull run ends will be the sweet spot. From there, the imminent crash will see bears take over the market, and fast, too.

Bitcoin price chart from TradingView.com

BTC trading north of $42K | Source: BTCUSD on TradingView.com
Featured image from Bitcoin News, charts from TradingView.com

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Bearish chart pattern hints at $70 Solana (SOL) price before a possible oversold bounce

by Cointelegraph

Solana (SOL) price may fall to $70 a token in the coming weeks as a head and shoulders setup emerged on the daily timeframe and possibly points toward a 45%+ decline.

The chart below shows that SOL price rallied to nearly $217 in September 2021, dropped to a support level near $134 and then moved to establish a new record high of $260 in November 2021. Earlier this week, the price fell back to test the same $134-support level before breaking to a 2022 low at $87.73.

SOL/USD weekly price chart featuring head and shoulders setup. Source: TradingView

This phase of price action appears to have formed a head and shoulders setup, a bearish reversal pattern containing three consecutive peaks, with the middle one around $257 (called the “head”) coming out to be higher than the other two around the $200 to $210 (left and right shoulders).

Meanwhile, SOL’s three peaks have stood atop a common support level at $134, called the “neckline.” A fall below it signals an extended downtrend to the level at length equal to the maximum distance between the head and the neckline.

In SOL’s case, the distance is around $137, which puts its head and shoulders price target at nearly $170.

The trend so far

The bearish outlook came as SOL price dropped by more than 22% this week and currently the altcoin is around 55% from its record high, much in line with other large-cap digital assets, including Bitcoin (BTC) and Ether (ETH). 

BTC/USD vs. ETH/USD weekly price chart. Source: TradingView

At the center of the ongoing crypto market decline is the U.S. Federal Reserve’s decision to unwind its $120 billion a month asset purchasing program followed by three or more interest rate hikes spread throughout 2022.

The central bank’s loose monetary policies had assisted in pumping the crypto market’s valuation from $128 billion since March 2020 to as high as $3 trillion in Nov. 2021. Therefore, the evidence of tapering has been influencing investors to limit their exposure in over-pumped markets, including Solana, which had gained nearly 12,500% since March 2020.

As a result, if the crypto market continues declining in the sessions ahead, SOL will also be at risk of validating its head and shoulders setup.

SOL’s short term outlook

While SOL’s longer timeframe chart leans toward a prolonged bearish setup, its short-term outlook looks comparatively bullish. 

Related: Bitcoin dumps to hit six-month lows near $38K

SOL/USD daily price chart. Source: TradingView

That is primarily due to two factors. First, SOL price has fallen to a critical support level of $116 that was instrumental in limiting its downside attempts in September 2021. And second, its daily relative strength index (RSI) dropped to below 30 — a classic buy signal.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.