An ongoing correction in the Bitcoin market may lead the cryptocurrency lower below $10,500, according to Alexander Nikitin.
The founder of MPS Trade, an independent trading consultancy portal, spotted BTC/USD in a Head & Shoulder breakdown pattern. He noted that the pair earlier formed a set of three peaks–with the middle one being the highest–on a baseline that acted as support.
Bitcoin’s Downside Setup
As of August 25, BTC/USD broke below the said price floor. The plunged followed with a deeper downside correction in the daily sessions afterward, leading Mr. Nikitin to turn to textbook Head & Shoulder targets to spot Bitcoin’s next support level. He narrowed the hunt down to below $10,200.
In an H&S pattern, the price typically falls below the baseline by as much as the peak’s maximum height. That allowed Mr. Nikitin to see the area above $10,200 as his “target zone.”
Bitcoin breaking out of the H&S pattern to the downside. Source: TradingView.com
The analyst also discussed the possibility of Bitcoin finding a pullback level ahead of the $10,200 level. His nearest support range–the “target#1 zone” in the chart above–coincided with levels above $10,742.
“Target#1 zone is limited by ab=cd measurement that is pretty common target method,” Mr. Nikitin added.
“Target#2 is the standard height of the head target. If no reversals appear in the sell zone then no short positions should be opened. If price breaks the sell zone to the upside with a large expansion bar plus follow-through, then buy positions should be considered.”
Macro Pressure
The downside warning came as Bitcoin repeatedly rejected advances above $12,000. A higher selling sentiment near the said level pushed the cryptocurrency price lower. In one instance, it found credible support near $10,500, a level that served as resistance during the Bitcoin’s bullish attempts in the first half of 2020.
One analyst called $10,500 his buying target should the price tests the level as its daily support. He also stated that a reversal above $11,700 would also prompt him to buy Bitcoin with the same bullish bias. Excerpts:
“It’s only Tuesday but this would be pretty bearish and ugly with it rounding off. My highest area of interest remains around 10.5k. I’ve sold off the #bitcoin. I bought it earlier today from last week’s sales. Will buy back at 11.7k daily close or 10.5k.”
Bitcoin trade setup by crypto trader Pentoshi. Source: TradingView.com
Some observers believe the cryptocurrency would retain its short-term bullish bias after the annual Jackson Hole meeting this week. The Kansas conference, which will take place virtually on Thursday and Friday, will see a keynote from the US Federal Reserve’s Chairman Jerome Powell.
Investors anticipate that Mr. Powell would adopt average inflation targeting, a move that expects to create further downward pressure on the US dollar. That will likely benefit Bitcoin, which has developed a negative correlation with the greenback since March 2020.
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