(Back from a long vacation.)
The price of Bitcoin has rallied right along with the stock market over the last several months. But Bitcoin has been engaged in a much more significant process over the last ten months. It has been forming a strong foundational base. The recent breakout from that base could propel the price of Bitcoin significantly higher.
The process began in October last year with the formation of what was to be the left shoulder of an inverse head and shoulders pattern. Bitcoin fell to about $6,500 but then moved back up to the $10,000 level. A second and deeper dip took the price down briefly to $4,000, followed again by a rally back to the $10,000 area. This delineated the neckline level. A minor pullback in June was followed by some consolidation above the 50 day moving average, and then a strong breakout above neckline resistance.
A breakout from a well-defined inverse H&S formation projects an upside price target measured by taking the height of the pattern and adding it to the neckline. In this case the H&S pattern projects a target price in the $16,000 area. That may or may not turn out to be the case but it is what the textbooks suggest. Bitcoin’s solid basing action over the last ten months certainly sets up the possibility.
The Relative Strength Index, a measure of price momentum, is above its center line. Chaikin Money Flow, a measure of the strength and direction of money flow, is also tracking higher and above its center line. The chart and the technical indicators are all bullish and the expectation is that Bitcoin continues to move higher.