Bitcoin (BTC) is attempting to cement an inverse head and shoulders pattern, success in which could spark a “sprint” to $40,000.
The pattern, which is considered a bullish reversal signal, has been forming since BTC‘s price bottomed out at $28,600 on January 24. The neckline of the pattern is currently at $37,600.
If BTC can successfully retest and hold above the neckline, it will be a strong indication that the pattern is indeed playing out. This could lead to a move up to $40,000, which is the target price for the pattern.
Inverse Head and Shoulders Pattern
An inverse head and shoulders pattern is a bullish reversal pattern that forms when the price of an asset makes three consecutive peaks, with the middle peak (the head) being the highest and the third peak (the shoulders) being lower than the first peak.
The pattern is considered to be a reliable indicator of a trend reversal because it shows that sellers are losing momentum and buyers are starting to take control.
Bullish Targets
Once the neckline of an inverse head and shoulders pattern is broken, the price of the asset is expected to rise to a target price that is equal to the distance between the neckline and the head, measured from the breakout point.
In the case of Bitcoin, the target price would be $40,000. This is calculated by taking the distance between the neckline ($37,600) and the head ($42,000) and measuring it from the breakout point ($37,600).
Other Factors to Consider
While the inverse head and shoulders pattern is a bullish indicator, it is important to consider other factors before making a trading decision. These factors include the overall market sentiment, the technical indicators, and the news cycle.
The overall market sentiment is important because it can influence the price of Bitcoin. If the overall market is bullish, then Bitcoin is more likely to rise in price.
Technical indicators can also provide clues about the direction of the price. For example, if the moving averages are sloping upwards, then this is a sign that the trend is bullish.
The news cycle can also have an impact on the price of Bitcoin. If there is positive news about Bitcoin, such as a major exchange listing or a large institutional investment, then this could lead to a price increase.
Conclusion
The inverse head and shoulders pattern is a bullish indicator that suggests that Bitcoin could rise to $40,000 if the neckline is broken. However, it is important to consider other factors before making a trading decision.
