A technical analysis chart of bitcoin prices suggests that the digital currency’s value is likely to shoot higher.
Can a Pennant Signal an Upward Trend?
This pennant pattern is generally observed when there is a large movement in the underlying asset followed by a consolidation period with converging trendlines followed by a breakout. The breakout is usually in the same direction as the initial large movement but not always.
The two trendlines forming the triangle converges at a point known as the apex. The price of bitcoin will bounce between these trendlines and edge towards the apex before breaking out. The consolidation period can be long or short and, during that time, bitcoin prices will move sideways.In general, a pennant pattern does not guarantee that a breakout will occur. It also does not predict the direction of the breakout, but typically the breakout is in the direction of the prior trend. There are times when the previous trend is not continued, and a new trend is formed. When this happens, the technical analysis chart will show different patterns.
Bitcoin Price Likely to Breakout
According to Jonathan Krinsky, chief market technician at MKM Partners, the breakout will only be confirmed when bitcoin price reaches the $775 to $780 level, or the consolidation period is not over. Also, since the prior trend is upward, the breakout should be in the upward direction.He further explained that the formation of a pennant indicates that a long-term trend in bitcoin price will resume after a small period of consolidation. Bitcoin price reached its 2016 high on June 19 of approximately $764. A pennant pattern implies that the price will soon rise above that level.
Investors Need to Act Fast
Krinsky said that for investors who plan to trade based on technical chart patterns and take advantage of the price rise, they need to act fast. In technical analysis, he explained, it is an accepted rule in general that when the prices are two-thirds of the way to the pattern’s apex, it will break higher. He noted:
“We’re pretty much at that point where it should break out.”
Since October 2015, the price of a bitcoin has already risen sharply, making it the best performing currency and asset class so far in 2016, even as the price has declined over the last three weeks. Record-low bond yields, uncertainty over the Brexit, and a perceived stall in global GDP growth have all pushed investors to seek safe-haven assets.Bitcoin has been in a prime position to receive these investors with much of the mainstream media talking about the investment, some even going so far to declare bitcoin a safe-haven asset. Add to this the reduction in the supply of new bitcoins that was created Saturday by a quadrennial phenomenon known as the halving; it appears more likely than ever that the time is right for prices to rise further.When do you think bitcoin price will break out? Let us know in the comment section below.Images courtesy of MarketWatch, Sober Look, Investopedia.com, TradingExchange.com
Really? This price is rise again? Gooooooood! =D
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