Sharing a Bitcoin (BTC) chart on the daily time frame, Peter Brandt cautioned that traders should not ignore a head and shoulders pattern when confirmed.
Peter Lewis Brandt, veteran trader, and accomplished analyst, recently called attention to a head and shoulders pattern formed on the Bitcoin (BTC) daily chart. Brandt cautioned investors not to ignore the confirmation, as the pattern indicates a looming trend reversal to the downside.
“A head and shoulders should be taken seriously if it is completed,” Brandt disclosed in a recent tweet, as he shared a chart that shows the formation of the pattern.
A head and shoulders should be taken seriously if it is completed $BTC pic.twitter.com/n5ZiLasmUC
— Peter Brandt (@PeterLBrandt) May 11, 2023
The chart indicates that BTC formed the left shoulder when it broke out from the $20,000 price in February to between $26,000 and $ 28,000 in March. The asset formed the head in April amid the impressive run to the high of $31,000 on April 14. The right shoulder was formed when BTC recovered from the dip between April 19 and 24.
A head and shoulders pattern typically signals a potential trend reversal from bullish to bearish. It is formed by three peaks, with the middle peak (the “head”) being the highest and the other two peaks (the “shoulders”) being lower and roughly equal in height.
The pattern is identified with a neckline connecting the lows of the shoulders. When the price breaks below the support found at the neckline, it is considered a confirmation of the pattern, suggesting that the previous uptrend has exhausted itself and a new downtrend is likely to occur.
An End to the BTC Uptrend?
Bitcoin’s uptrend began at the start of the year and reached its peak in mid-April. The asset has been shedding off some of the gains picked up in the rally but has retained a 65% gain this year. If the head and shoulders pattern is accurate, BTC could see an end to the rally.
However, it’s important to note that not all head and shoulders patterns are equal; additional confirmations are necessary for informed trade decisions. This is because false breakouts and whipsaws can occur. At the time of reporting, BTC is currently trading for $27,384, down 1% in the past 24 hours and 5.92% in the past week.
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