Bitcoin could be done with its climb as it formed a head and shoulders pattern on its 1-hour time frame. Price has yet to break below the neckline to confirm that a selloff of the same height as the formation is due.
Note that the chart pattern spans around $9,800 to $10,500 so the drop could last by $700 to $9,000. The 100 SMA has crossed below the 200 SMA to confirm that bearish momentum is picking up or that support is more likely to break than to hold.
Stochastic is also turning lower without even reaching the overbought zone to signal that sellers are eager to hop in. RSI is also pointing down and price could follow suit as it heads south.
Bitcoin appears to be losing ground as risk appetite remains supported in financial markets, with stocks and commodities still on a tear despite rising coronavirus cases. With that, investors could move their funds back to the traditional holdings in expectations that the situation could be contained.
Still, bitcoin could draw support as the halving in May approaches. Previous instances resulted to twice the value of the coin over a span of a few months or years, so traders might be keen on positioning ahead.
Also, a return in risk aversion could also mean another leg higher for bitcoin in the next few days. However, the odds of these are looking slim unless major headlines on the outbreak are enough to make investors nervous once more. By the looks of it, traders are finding comfort in stimulus measures launched by China and planned by other authorities as these could also prop up the global economy in the longer-run.
Images courtesy of TradingView
