Analysts at Valkyrie Investments are eyeing a potential “head and shoulders” bearish reversal pattern on Bitcoin’s daily chart. While the pattern may not meet traditional criteria, it has two flanking lower highs surrounding a larger one representing the head. Financial professionals consider this pattern a sign of an upcoming shift from a bullish to a bearish market trend. Thus, traders are typically more inclined to take bearish bets when prices fall under the trendline connecting the first and second troughs.
Valkyrie’s analysts recommend watching the “two high timeframe trend metrics,” despite the emergence of the H&S reversal pattern. Furthermore, if the price drops beneath the neckline (around $27,300), Bitcoin may plunge to a suggested target of $24,000. However, this is assuming that the mildly bearish pattern will prompt deeper, more significant declines in the near term.
It should be noted that volatile factors like macroeconomic developments can nullify these patterns. In technical analysis terms, graphs serve as a subjective form of analysis and can prove to be inaccurate. Plus, a bearish reversal may not fulfill its prediction, making it more difficult to determine future pricing movements.
Macroeconomic developments – particularly Friday’s U.S. nonfarm payrolls report – could nullify the head and shoulders pattern. If the report shows the labor market’s weakness and signals a pivot towards liquidity boosting interest rate cuts from the Federal Reserve, Bitcoin’s downward trend may be invalidated. It’s worth noting that the Fed’s Chairman, Jerome Powell, still thinks that the next move depends on the incoming data.
The head and shoulders pattern may signify that Bitcoin faces short-term setbacks before it takes off again. Despite this possible bearish move, Bitcoin has been enjoying long-term bullish trends. However, average investors need to take caution when using technical analysis to make trading decisions because the markets are incredibly unpredictable.
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https://www.coindesk.com/markets/2023/05/05/bitcoin-faces-downside-risks-on-head-and-shoulders-pattern-us-nonfarm-payrolls-eyed/