Welcome to this update analysis on Bitcoin! let's go straight to the point! Looking at the daily chart of the BTC, we can see that Bitcoin is still being consolidated sideways. As you know, we explained that this could eventually form a reversed head and shoulders pattern (in green). However, we could also simply continue the downtrend by forming another high lower. At this point, it's unclear how the market will evolve, and most traders are just waiting to see how that happens.
As you can see, it is possible for BTC to form a big bull flag (in black) on what could be the right shoulder of a reversed head and shoulders pattern (in green). None of this, however, is confirmed. Regarding this potential bull flag, there is an irregular shaft, with a perfectly parallel flag body. By climbing up from the lowest point of the head, you can see that there is a level of support for the black dashed trend line that intersects this potential flag. Price is squeezed between the maximum resistance of this potential flag and the increasing support of the head (dashed black trend line.) So, if we observe a break below the rising black dotted line, I think that could quickly cancel the potential of a bull flag. However, if we get a break above the higher resistance of this potential flag, we could witness a strong rally at the neck of the boss head and shoulders (in blue). Such a movement would complete the pattern, and from there we would like an escape over the cleavage for confirmation.
As I've been mentioning for several days, the 300 EMA (in orange), which is equal to the 50 EMA on the daily chart, is now starting to converge with the decollete pattern of the head and shoulders. So, if the price can go back above this level and go beyond that level, I think we will see a strong upward push of the downtrend channel (in pink) that would put us somewhere in the bottom to 5000.
As the price approaches the top of the flag and the growing support of the head, we will soon see a break in one direction or another. A break below this increase in support will likely lead to an initial downward push. However, it is technically possible that BTC is forming an inverted schema for the moment. As I said, we do not know for sure. So, I would wait to see an escape before doing trades.
On the downside, if the price does not hold the 3000 level, we could see a strong sale on the market, which could bring us back to 2000 or even 1100. This is definitely a short-term opportunity. However, I am still bullish in the long run on Bitcoin and crypto in general. I think that if we witness a powerful failure below 3000, we could finally see the big capitulation that everyone was waiting for.
As the market goes down, we do not always know in which direction it will go. When it breaks, the neckline of the head and shoulders will be a key area of interest on the rise. On the other hand, the 3000 level will be a critical level for the market.
Happy New Year everyone!
