We’ve charted the decline in the price of Bitcoin since the beginning of the year, and it has not been pretty. But over the last several days some very constructive technical work has been accomplished on the 30 minute chart, which could suggest that the trend might be at an end.
After the “flash crash” low was taken out so decisively it was unclear where the crypto-currency might find support on this particular time frame. To be sure the 9,200 level had no particular technical significance, but that is where Bitcoin chose to bounce. The subsequent oscillation around the “flash crash” support-turned-resistance level formed the right shoulder of an inverse head and shoulders pattern. This bullish reversal pattern was the first sign that the decline may be abating and a base could be forming.
The second consolidation clue was the horizontal channel pattern that formed over the last two days. Today’s early penetration of that channel resistance level has taken the price of Bitcoin to an important intersection of trend line resistance in the 12,800 area. This zone of resistance includes the long term (long term on this time frame) downtrend line that is drawn off the highs of the month.
A sustained move above this key trend line would be the final phase of the basing process and considered technical confirmation of a shift in the direction of the trend.