Chart Of The Day: Look Out Below, Bitcoin Could Be Headed To $30,000
Investing.com | May 06, 2021 09:36AM ET
The last time we wrote about Bitcoin in this column, at the end of March, we were bullish on the cryptocurrency's trajectory. Sure enough, since then, the price climbed, gaining almost an additional $8,000, or 14%. However, our outlook has now changed.
Yes, we know that crypto custody firm NYDIG repeated claim that the cryptocurrency leader by market cap should hit “$1 million a coin,” but the caveat attached to that is always "eventually."
In February, even before the token hit an all-time high, shooting past $63K in mid-April, we made the counterintuitive argument that “smart money buying into Bitcoin may signal a top.” We weren't saying the digital currency couldn't go higher then (it obviously did), nor are we about to make that pronouncement now. Rather, in the current environment, competition from other, less expensive cryptocurrencies with better potential for massive gains on a percentage basis are siphoning demand away from Bitcoin.
BTC technicals are signaling demand weakness. Based on that, we're now bearish.
We have been monitoring the development, then the completion, of a rising wedge, bearish after a climactic rally. When Bitcoin couldn’t resume the same rate of ascent after the completion, demand floundered, leaving sellers with little support.
The wedge would have seen the price go back to the $40,000s but the pattern that emerged from the breakout—coupled by a return move to the wedge—puts a H&S on the table. The neckline is downward sloping, manifesting the slumping demand that couldn’t even muster a proper right shoulder. A downside breakout would target the $30,000 level.
h2 Trading Strategies – Short Position Setup/h2Conservative traders should wait on a short for the price to complete the H&S pattern.
Moderate traders would short upon a bearish candle, confirming the right shoulder’s resistance.
Aggressive traders could short at will, having accepted the added risk to match the higher reward of entering a position with no confirmation, in order to make a move ahead of the market. Money management is especially crucial for higher risk positions.
Here’s an example:
Trade Sample
- Entry: $58,200
- Stop-Loss: $58,700
- Risk: $500
- Target: $48,200
- Reward: $10,000
- Risk:Reward Ratio: 1:20
Get The News You Want
Author's Note: The above is just a sample, not the full analysis. This trade can be approached in diverse ways, depended upon your risk aversion, budget and timing. Until you learn how to draw your own trade plans, use ours, but only for the purpose of learning, not necessarily profiting. Otherwise, you’ll end up with neither.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.