Months ago when Bitcoin price made it through $13,000 top analysts said “the train has left the station,” and they were right. Or maybe a rocketship would have been a better analogy. The cryptocurrency took off and has yet to refuel, until now.
With momentum waning, bears have staged an “island reversal” that could push off higher prices again for some time. Here’s what to expect from the tropical-sounding pattern that could leave bulls stranded for some time.
Technical Analysis Education: What Is An Island Reversal?
According to Investopedia, an “island reversal” is a price pattern on a daily candlestick chart that has a gap on each side of a the structure. “This price pattern suggests that prices may reverse whatever trend they are currently exhibiting, whether from upward to downward or from downward to upward,” a description reads.
The recent Bitcoin price action fits the pattern and the conditions that validate its existence to a “T.” An island reversal forms after a long trend leading into the pattern. Bitcoin’s performance has been incredible since March of last year.
Related Reading | The Bearish Bitcoin Chart Bulls Definitely Don’t Want To See
At the climax of the trend, there’s an initial price gap, followed by a consolidating price cluster. Finally, there’s a gap back down on the daily chart, establishing the “island of prices isolated from the preceding trend.”
The theory behind the pattern suggests that the gaps left behind will go unfilled for some time.
The price action matches the "island reversal" pattern | Source: BTCUSD on TradingView.com
Will Bulls Be Left Stranded On Bitcoin Coin
A coin is a unit of digital value. When describing cryptocurrencies, they are built using the bitcoin technology and have no other value unlike tokens which have the potential of software being built with them.
There’s also potentially another parabolic curve in process not fully developed yet that keeps the predominant bull trend in tact, even if things get volatile over the next several weeks ahead.
Featured image from Pixabay, Charts from TradingView.com