Bitcoin’s attempt to rally past the $7,000 region has proven to be fleeting, with the benchmark cryptocurrency losing its momentum beyond this point and reeling below the support that had been established at $6,800 in a sharp overnight movement.
This recent price action has led to the formation of a clear head and shoulders pattern – a signal that the cryptocurrency could be in for some serious losses in the days and weeks ahead.
Bitcoin at Risk of Losing All Bullishness Following Dire Overnight Decline
Currently, Bitcoin is trading down over 3% at $6,700, which is a hair below where the crypto had been trading at prior to the fleeting rally.
This upswing let the cryptocurrency to highs of over $7,200 yesterday, before it once again faced a rejection within the region.
Bitcoin has now been rejected within the lower-$7,000 region on three occasions over the past couple of weeks, and its inability to stabilize here is an overtly bearish sign that suggests this may prove to be a mid-term top.
This latest decline has also led BTC to reach a level that is critical for its mid-term market structure, as a failure for it to hold above $6,500 could invalidate all its subtle signs of bullishness and lead it to reel even lower.
One highly respected cryptocurrency analyst who trades by the name of “Flood” spoke about the importance of this level in a recent tweet, noting that he remains bull biased as long as BTC trades above it.
“I hate planning out multileg trades but probably something like in the next few days. I’m bull biased here unless we dump below 6.5k. Then it would be pretty clear invalidation,” he said while referencing the below chart.
Image Courtesy of Flood
Could This Technical Pattern Spark Another Capitulatory Decline?
Despite Flood’s tempered bullishness, it is imperative to keep in mind that the multiple rejections BTC has faced in the lower-$7,000 region have formed what appears to be a head and shoulders pattern.
Mohit Sorout – another popular analyst and trader – pointed to this strikingly clear formation in a chart, noting that H&S setups are some of the most reliable classical charting patterns.
“Valid HnS top on BTC… Contrary to what people might have you believe on here, HnS setups are one of the most reliable classical patterns especially on higher timeframes,” he explained.
Image Courtesy of Mohit Sorout
Unless bulls perpetuate a notable upswing in the days and hours ahead, it is possible that Bitcoin will see a sharp decline sparked by its weakening market structure.
Featured image from Unsplash.