Bitcoin Confirms Bearish Pattern: Is the Next Leg Down About to Begin?

The $BTC price has just confirmed below the neckline of a bearish head and shoulders pattern. Could the price now go down to $57K, or will a fakeout catch traders by surprise?

Head and shoulders pattern confirmed

Source: TradingView

The short-term time frame shows the head and shoulders pattern. The pattern has completely played out and the $BTC price has pierced through the neckline, having just confirmed the breakdown by rising up to touch the neckline again in the last few hours. If the pattern continues playing out its measured move, this could take the price all the way down to $57K.

Of course, there is a little matter of a bull market trendline and horizontal support between here and the $57K bear target, but if the bears can get some momentum behind them, perhaps helped by a U.S. stock market that is starting to fall, $57K may just be a staging point on the way down to $50K.

If on the other hand the stock market rallies, perhaps on news of successful talks between the US and Iran, Bitcoin could just rally back to the last high, invalidating the head and shoulders pattern. It could even recommence the short-term trend to the upside.

No real momentum behind breakdown so far

Source: TradingView

The daily time frame shows the measured move out of the head and shoulders pattern, down to $57,400. So far there is no volume to speak of that would suggest the sellers are getting behind this move, but if the $BTC price does continue to come down, sellers could start to jump onboard.

It can be seen that $52K down to $50K could be targets if a crash materialised and the price came down to test the bear market trendline.

Bullish divergence puts bear market on last legs

Source: TradingView

Things are starting to take shape in the weekly time frame. A simply huge sign that this bear market might be on its last legs is the bullish divergence between price action and the RSI. Given that this is a high time frame, this bullish divergence is really no joke. 

Could the bullish divergence be invalidated? Yes, it could, but the exciting thing for the bulls here is that while the price could come down further, it’s not going to invalidate the divergence. It’s the RSI indicator line that would need to come down and take out the previous bottom. On paper this might seem a reasonable possibility, but not if one considers that the last bottom is almost as low as the June 2022 RSI bottom, which is the lowest point on record.

If we look at the RSI during that last bear market, it can be seen that once a bottom was reached the price went sideways and downwards to the actual bottom, which was around 13% lower. If we translate that forward to today’s situation, it could mean the $BTC price dropping to around $52K - a price already mentioned.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.