Bitcoin price is right now forming this head and shoulders pattern which is a bearish pattern. I will point out where the target is but I'm also going to show you in the immediate short-term, the signal that could show us if a pump is coming before a potential dump.
The head and shoulders pattern is a bearish pattern because it's a reversal pattern. This sort of pattern is actually only Bearish when it breaks down. Some people like to short during this kind of pattern. But I never touch it until the point of the breakdown.
If the bitcoin price breaks the neckline on that pattern, that's when we get the sell signal, that is the short signal. And this signal hasn't happened yet. Another important thing to point out is that with bitcoin being so volatile now, wicks are being formed a lot. But we aren't sure if it's a breakdown.
There are two different things we can do, one is that we wait for a 4-hour close below the neckline. That's one signal telling us that now it's very likely that we're just going to continue to go down. That's when we can put in the short. The other way you can do this is to wait for a breakdown and a free retest of the resistance and then short at the resistance, you and then we most likely will continue to go lower. That's basically up to you personally.
I do think waiting for a four-hour close would be fine. Should be fine and in my opinion, I think that this is going to be a very interesting event because if you do break the neckline we are most likely going to see a pretty significant correction.
Taking a look at the target, if these breaks to the downside the point of a potential breakout. A target would be down to $21270. This would be a trade of approximately 32%. We can actually put this stock up a little bit here and we would have a risk-reward and 32% against 4%. This position could be a nice opportunity to make money on bitcoin if we were to break the neckline.
But remember this is not a bearish signal yet, this is only a sell signal if we break the neckline and we didn't break it just yet. But this is a good opportunity if it plays out.
