Bitcoin reached a new record high on Tuesday, breaking above the $68,000 level. By the time of writing, the digital currency has rolled back from its peak. Nevertheless, bitcoin continues to trade near the key level, while maintaining an increase that continues for the fourth day in a row.
On Monday alone, the price of bitcoin jumped by 6.7%
During the current rally, the cryptocurrency gained 11.4%. Analysts of digital currencies associate the update of record highs with a lack of supply amid increasing global interest in the crypt. Thanks to the bitcoin rally, the total market capitalization of cryptocurrencies on Monday exceeded the $3 trillion mark for the first time. Thus, in 2021 alone, the total value of this asset class has increased by more than 280%.
Regardless of whether the current dynamics is supported by fundamental factors, the ascent of recent days has provoked a technical chain reaction, as a result of which bitcoin may rush towards $90,000.
BTC/USD – daily timeframe BTC/USD – daily timeframe
Yesterday, a “bullish” pattern formed on the chart — a potential “pennant” from the high of October 20, the previous record peak of the cryptocurrency.
“Pennant” is a continuation figure, which, as a rule, is formed after a rapid, intensive price increase.
Although we are somewhat confused by the area of horizontal price movement under the “pennant” (the green oval on the chart), given the impressive 62% rally that preceded in just three weeks, we are ready to interpret the classic definition of “pennant” less strictly.
The formed pattern can also be classified as an upward-skewed “head and shoulders” (H&S) reversal pattern, which turned out to be unsuccessful, which could force investors to change short positions to long ones.
The calculation of target levels depends on the type of pattern.
According to the requirements for the “pennant”, if prices change in accordance with expectations, you can count on a repeat of the previous rally by $ 25,000. However, if we conclude that we are dealing with an unsuccessful H&S formation, then we can expect that the subsequent growth will coincide in height with the shortest part of H&S.
Both values are calculated based on the breakout point, i.e. about $63,500.
If we are dealing with H&S, the target level will be $6,700 above the breakout point when calculating from the peak on October 20 to the minimum on November 6. If we interpret the formation as a “pennant”, then the rally from the low of September 9 will be taken for calculation. The target level in this case will be $25,000 above the breakout point of $63,500.
Conservative traders should wait for a pullback with a repeated check on the strength of the pattern support.
Moderate traders should wait for the same pullback for a more optimal entry point and for confirmation.
Aggressive traders can, contrary to the trend, open a short position in anticipation of a corrective fall after a rally to record highs, but only if they accept the increased risk associated with the potential to generate more income when acting ahead of the market. Traders, unlike speculators, have a consistent trading plan.