BTC is in a good setup for a head and shoulders to the downside. The head and shoulders is a bearish pattern where the price bounces and returns to the "Neckline" support level the 3 times with the final return resulting in a break of neckline support.
How to spot
The easiest way to spot a head and shoulders is to find a support level that the price is bouncing off of. Look for a moderate bounce that returns to support followed by a larger bounce that also returns to support. This is the left shoulder, head setup. In this case, you can see a possible right shoulder forming around $23120. This price area has proven to be strong resistance. It has kept the price at bay for weeks now with all breakouts retreating back below it. As a result, it's the perfect set up for a head and shoulders.
How to set your target price
To determine your target price, measure the distance between the top of the head and the neckline. In this case, $1500. Subtract this amount from the neckline and you will get your target price.
Make the bearish case
How is the price action looking? Is the price action bearish? Is there a lot of buy or sell volume? By making a bearish case prior to your head and shoulders call, you will have more success in your trades.
BTC BEARISH CASE
-Broke the red channel
-Returned back below strong resistance
-Bear flag setup for right shoulder
How to Trade
Some traders like to enter their short at the top of what they perceive to be the right shoulder. The weaker (lower) the right shoulder in comparison to the left shoulder, the better. This shoulder is still early so its difficult to say whether we've topped yet, but the strong resistance would make me feel better about entering here. Other traders like to enter their short once the price has broken the neckline, which would be a more definite bearish move.
Technical patterns are never 100% for certain. However, if you can spot them and trade them in the right circumstances, you will find a lot of success. Best of luck! I hope this helps improve your trading and your PnL!
How to spot
The easiest way to spot a head and shoulders is to find a support level that the price is bouncing off of. Look for a moderate bounce that returns to support followed by a larger bounce that also returns to support. This is the left shoulder, head setup. In this case, you can see a possible right shoulder forming around $23120. This price area has proven to be strong resistance. It has kept the price at bay for weeks now with all breakouts retreating back below it. As a result, it's the perfect set up for a head and shoulders.
How to set your target price
To determine your target price, measure the distance between the top of the head and the neckline. In this case, $1500. Subtract this amount from the neckline and you will get your target price.
Make the bearish case
How is the price action looking? Is the price action bearish? Is there a lot of buy or sell volume? By making a bearish case prior to your head and shoulders call, you will have more success in your trades.
BTC BEARISH CASE
-Broke the red channel
-Returned back below strong resistance
-Bear flag setup for right shoulder
How to Trade
Some traders like to enter their short at the top of what they perceive to be the right shoulder. The weaker (lower) the right shoulder in comparison to the left shoulder, the better. This shoulder is still early so its difficult to say whether we've topped yet, but the strong resistance would make me feel better about entering here. Other traders like to enter their short once the price has broken the neckline, which would be a more definite bearish move.
Technical patterns are never 100% for certain. However, if you can spot them and trade them in the right circumstances, you will find a lot of success. Best of luck! I hope this helps improve your trading and your PnL!