Bitcoin – Correction tease continues

A possible head and shoulders?

It’s not often that bitcoin feels like it’s standing still but for weeks now, it looks like it’s been shaping up for a correction and it has neither corrected nor broken higher.

Earlier this week it tested those lows (rough) around $44,000 and once again, bitcoin bulls fought back and defended that crucial support region.

Since then, it’s rallied once more but still has some way to go to change the perception that a correction appears to be building.

But it has reached an interesting level that may give some insight into what’s to follow around $48,000, which falls around the 50/61.8 fib levels on the 4-hour chart. A rotation off this level back towards $44,000 would leave what appears to be a head and shoulders pattern (not perfect, granted).

That would continue to suggest we’re shaping up for a correction, although a break of the neckline is needed to complete it. A break of this would also break the 200/233-period SMA on the 4-hour chart, which follows a break of the 55/89 band last week that had been a reliable area of support.

The issue is that the neckline isn’t as clear as you’d hope so a significant break would be needed to provide any degree of comfort. But if it comes, the correction could be quite significant.

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Craig Erlam

Craig Erlam

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary.

His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News.

Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.