The Daily tf chart of Bitcoin (BTCUSD) is shown in this analysis with an inspection of chart patterns that can be identified and their possible implications. The relative strength index (RSI) is also used in this analysis to help in assessing the different scenarios possible for Bitcoin (BTCUSD) . The numbers on the charts are discussed below in an ascending order.
(1) Descending triangle: This bearish chart pattern (although not 100% of the time) is drawn here in black lines with price action breaking out of the pattern initially on June 13, 2018.
(2) A log scale was used in this case as it makes chart patterns clearer to inspect. The blue arrow as drawn on the chart indicates the width of the descending triangle. Should Bitcoin (BTCUSD) continue to collapse, the width of the chart pattern can be used estimate the price target for Bitcoin (BTCUSD) to the downside. Measurements of a possible target should however be done on a linear (arithmetic) scale, and not on the log scale.
(3) Price channel in pink color is used to capture price action from May 6, 2018 to current date. The bearish channel has been active for well over a month now and should not be overlooked. Price action exiting below the bottom of the channel implies more selling and further movement to the downside in the price of Bitcoin (BTCUSD).
Price closing above the channel however could result in bullish movement in the price of Bitcoin. If this happens, it is still important to keep in mind that the bear channel is inside a larger chart pattern (descending triangle). Chart patterns nesting inside of one another is a regular occurrence and knowing how to keep chart patterns in perspective in terms of a bigger picture is crucial.
(4) Last but not the least is the relative strength index (RSI). A dark green line is drawn on the RSI to indicate a negative slope on the oscillator. Any bullish trade for Bitcoin (BTCUSD) would be better if price action broke to the upside of the price channel while the RSI also at the same time has moved above the downtrend line.
So should you buy or sell Bitcoin (BTCUSD)? Based on the analysis above, it is best to have patience to see what path price action follows and then take appropriate action if the risk/reward ratio is satisfactory.
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