Many chartists and technicians have suggested the price action in Bitcoin over the last half of 2021 formed a massive Head & Shoulders top on the daily chart. The September 2021 high forming the left shoulder of the pattern, the November high the head, with the right shoulder formed by last year’s December 2021 and January 2022 price action.
This week the $40,500 neckline of this huge bearish reversal pattern was broken. If the downside price action plays out according to the textbooks Bitcoin’s price could revisit the low teens.
The typical Head & Shoulders formation suggests a downside target price projection that is measured by taking the height of the formation and subtracting it from the neckline. In Bitcoin’s case, the difference from the top of the head to the neckline is $27,500 which subtracted from the neckline number gives us a $13,250 target price. That is about a 75% drop from the neckline level.
Hopefully for the Bitcoin bulls, many chartists and technicians are wrong about this Head & Shoulders top.
The NASDAQ Composite Index has traded down to a key technical inflection point. Support for the Composite resides in an area between the 15,000 and the 14,750 levels. On the lower end of the zone is the 40 week (~200 day) moving average, and the upper bound is reinforced by the intersection of two important trend lines. One of the trend lines defines the year-to-date uptrend and the other defines horizontal support, as the Composite has been consolidating over the last month.
The NASDAQ has seen a recent decline in positive price momentum reflected in the Relative Strength Index reading. The index is moving below its center line suggesting negative price momentum. The Chaikin Indicator tracks money flow momentum. It was strong for most of last year reflecting very positive money flow, but since November it has fallen off dramatically. This suggests heavy or institutional distribution.
So the NASDAQ Composite is poised at an intersection of key technical trend line support. Additionally price momentum and money flow momentum indicators are tracking lower. This is clearly a very bearish moment for the Composite and technology stocks in general. If the 14,750 level cracks the 14,250 support level is coming right up, but it would be even less likely to hold. This is because of the pace of price and money flow momentum and direction.