It was just two days ago that it looked like an end to the decline in the price of bitcoin, that began earlier this month. But as the 30 minute chart shows that was not to be the case.
Bitcoin had jut broken out of an inverse head and shoulders pattern that had formed below the “flash crash” low. As the initial upside momentum subsided, price began moving in a horizontal channel consolidation pattern. This was a healthy sign as the gains were being absorbed and a second platform from which to propel prices higher was being constructed. In fact, price did rally through top end channel resistance, briefly breaking through the downtrend line that had defined the decline this month.
A second smaller consolidation channel formed which extended the short cycle of higher highs and higher lows. Unfortunately for bitcoin bulls, that channel support level failed early Sunday morning and bitcoin quickly dropped back to its “flash crash” low. A weak attempt at a bounce off this level also failed and today’s price action has formed a bearish flag pattern below it.
The downside objective of the flag pattern is measured by taking the height of the flagpole and subtracting it from the bottom of the inverted flag. It projects back down to the $9,600 level just above the ‘head’ of the former inverse head and shoulders formation.