Bitcoin completes a head and shoulders topping pattern
Bitcoin first topped out in late 2013 at the price of 1163, to the US dollar. A severe one-year correction saw the price hit a low of 152.40 by the beginning of 2013. Since then it has been a one-way bet, reaching a peak at the beginning of September 2017 of 4979.90.
From that peak we have dropped around $1000. This is still an enormous return for buyers at the low this year at $751.35. However, a very negative and shoulders pattern has now formed. This is an important sell signal.
The neck line that you see in the four-hour chart above has clearly been broken today. We are now trading below the short-term moving averages, providing further negative confirmation.
Today’s trigger for further losses appears to be comments from JPMorgan Chase CEO Jamie Dimon. He was reported by CNBC as saying the cryptocurrency ‘is a fraud’.
‘It’s just not a real thing, eventually it will be closed,’ Dimon said Tuesday at the Delivering Alpha conference presented by CNBC and Institutional Investor.
‘It’s worse than tulip bulbs. It won’t end well. Someone is going to get killed,’ Dimon also said at a banking industry conference organised by Barclays. ‘Currencies have legal support. It will blow up.’
There is no reason why Bitcoin cannot fall as quickly as it rose. The first level of support is found at 3840/3800. We could well see a bounce from here back up to the neck line at 4250/4300 for a selling opportunity. However, the measured target for the head and shoulders topping pattern is 3300/3100. This coincides with the 100-day moving average, currently residing at 3200.
This area should be strong support and we should see a strong bounce from here, as bulls step in to hoover up what they see as a cheap bargain.
However, if this really is the modern-day version of the speculative tulip bubble, prices will eventually crash below the June high of 2967 (yes, we were 25% lower just three months ago) to target 2560 and perhaps even test the July low (only two months ago!) at 1830.
Technical Analyst & Trader
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