Bitcoin Daily (Coffee Shop) Technical Analysis - (25 Feb 18)

Licorice Tea - avoid if you have hypertension (apparently).

!Warning - This is not Financial advice: Do not trade or invest based on this analysis!

Price Action

The BTC price continues its consolidation between $9,000 and 12,000, as anticipated.

I've noted a bearish sentiment amongst pundits commenting on the price, with many expecting to see a breakdown to the $6,000 level. That may happen as the overhead resistance (represented by the thick red downtrend line) has withstood the recent attempts to break through.

Inverted Head & Shoulders

Although the Head & Shoulders patterns are speculative and can be phantom-wise, the current price behaviour supports this setup (at least an inverted version). However the price needs to hold the support provided by the left shoulder (@~$9,000), re-test and break the downward overhead trendline and then challenge the neckline (N/L) (@~$12,000). This would set a possible price target of $17,000.

Of course a significant breakdown below the shoulder level (S/L) would probably set the course for the $6,000 bearish target.

Volume

The trading volume is the key here; price moves (breaks of resistance, touches of support etc) are generally valid (and not fake outs) if they are accompanied by spikes in trading volume.

In the case of this possible inverted head and shoulders setup, one can see the spikes in volume (bottom histogram/bar chart) - highlighted in pink - at the same time as the prospective left shoulder (LS) and head (H) patterns formed.

One can also see on the On-Balance-Volume (OBV) indicator (middle blue line chart) that the LS and H are accompanied by a spike down in the OBV. These spikes down indicates a brief capitulation of buyers and sellers moving in only to punch themselves out, then buyers returning. The notable aspect here is the quickness at which it happens.

Therefore, for the Inverted H&S pattern be valid from a volume perspective there needs to be a spike in volume (probably selling volume followed by buying volume) and a corresponding spike down in the OBV. This might give BTC enough trading volatility to break through the downward trendline and neckline of the inv H&S.

Invalid

Of course this whole setup becomes invalid if the price breaks and holds below the left shoulder level (<$9,000), which it could easily do.

Also the setup would be invalidated if the price continues to oscillate between $9,000 and $12,000 with low volume and simply drifts through the downward trendline.

In either of these scenarios I'll be looking for a different technical formation.

Until tomorrow.

Bobby.