The Bitcoin price action during the month of May was relatively bearish. After rejecting the $10,000 mark twice, Bitcoin plummeted back to the $7,000 support level. As of press time, Bitcoin is trading at the $7,400 level after a successful bounce off the support line.
From June 2015 to March 2017, Bitcoin managed to record fairly steady growth. On March 2017 to December 2017, however, there was a massive breakout through the resistance lines that skyrocketed Bitcoin price to $20,000. This breakout proved to be unsustainable as price action got pulled back into a 6-month bearish trend that is still happening until today. Looking at the 4-year weekly logarithmic chart of Bitcoin, we can see a flag pattern forming.
The Flag Pattern
According to SpeedTrader.com, “flag patterns start off violently as the ‘other’ side gets caught off guard on the trend move or as bulls/bears become overambitious. On bull flags, the bears get blindsided due to complacency as the bulls charge ahead with a strong breakout causing bears to panic or add to their shorts. Once the stock peaks out, the bears regain some confidence as they add to their short positions only to get trapped again when the breakout forms causing more short covering. Since short-sellers from the initial flagpole run up may still be trapped, the second breakout forming through the flag can be even more extreme in terms of the angle and severity of price move. This is when forced liquidations and margin calls kick in. The same happens on bear flags, just inversely.”
Bitcoin Bull Flag?
The steady growth from June 2015 to March 2017 and the breakout from March 2017 to December 2017 appear to be the flagpole, and the price action from January 2018 until press time appears to be the 18-week flag. The next move of Bitcoin will determine which way the flag would go. A break above the resistance line would confirm that this is a Bull flag forming, which could propel Bitcoin to higher highs. On the other hand, however, a break below the support line could mean that this is still a corrective move.
Since we are looking at the 4-year weekly logarithmic chart, the next decisive move could happen in the next few months.
(DISCLAIMER: This is not financial advice. The analysis and recommendations provided here are based on my own research and personal opinion. Trade wisely!)
