Bitcoin has charted a falling wedge pattern on the daily chart. A break above $3,450 would confirm a wedge breakout and expose key resistance lined up at $3,658 (the high of the gravestone doji candle created on Jan. 26). A violation there would expose the psychological resistance of $4,000.
The prospects of a falling wedge breakout would weaken if the cryptocurrency suffers a channel breakdown on the 4-hour chart.
The slow drip bitcoin (BTC) price sell-off seen over the last six weeks has produced a bullish pattern on the daily chart.
The leading cryptocurrency by market value is currently down more than 20 percent from highs above $4,200 seen on Dec. 24. The pullback may have reinforced the primary bearish trend, as represented by the long-term moving average studies.
Still, all is not lost for the bulls, as the lower highs and lower lows created over the last six weeks have converged, creating a downward sloping cone or a falling wedge on the daily chart.
The falling wedge is a bullish reversal pattern, that is, the price will often break above the upper edge of the pattern and rally. A breakout, if confirmed, could open the doors for a strong corrective move.
As of writing, BTC is trading at $3,400 on Bitstamp, representing a 0.66 percent drop on the day. The falling wedge resistance is seen at $3,450.
Daily and 4-hour chart
On the weekly chart, the 5- and 10-candle MAs are trending south indicating a bearish setup. The falling volume bars, however, signal bearish exhaustion. BTC, therefore, could witness a falling wedge breakout, despite the bearish primary trend.
Disclosure: The author holds no cryptocurrency at the time of writing.
Original Posted on February 4, 2019 by Omkar Godbole
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