Megaphone-shaped patterns reflect growing discord among investors about the next Bitcoin trend bias.
Bitcoin’s (BTC) latest rebound from below $30,000 has increased its prospects of extending its retracement move higher, at least according to one classic technical pattern.
The megaphone-shaped pattern is known as the Broadening Formation. It appears when price moves within two diverging trendlines. Investopedia states that a broadening formation represents disagreement over the next potential bias among investors. The result is that the price forms lower interim highs and higher interim lows.
As shown in the chart below, Bitcoin seems to trade within a similar structure. However, volatility is not a key feature of the widening formation pattern.
If the pattern holds, Bitcoin prices will experience a bullish breakout higher than the upper trendline.
It would expect to increase by the maximum height between the broadening pattern’s upper trendline and lower trendline. Because traders see the broadening formation in a trend reversal, it creates an upside configuration.
However, daytraders can still profit from this pattern by trading swings. For example, traders could open short positions towards the lower trendline if the trendline pulls back from the lower.
These intra-range setups are invalidated again because of the Bitcoin price volatility.
The Bitcoin chart below shows the most recent interim resistance near the trendline.
If Bitcoin crosses the dashed trendline, it will likely test $35,000 as its next resistance level. Based on recent price trends, there is a higher chance that Bitcoin will reach $40,000 if it continues to move higher.
A pullback from the trendline is a sign of a Falling Channel pattern. Bitcoin could, however, retrace its steps towards the Broadening Wedge support trendline (next downside target at $28,500).
Bitcoin price fundamentals
As bulls defend $30,000, bears have control over the $34,000-35,000 Bitcoin area. Unfortunately, that has landed BTC price inside a constrained trading range, giving no interim clues about where it wants to head next.
The key to securing Bitcoin prices has been the fundamentals. Inflationary pressures in the traditional finance sector have been a positive factor, providing tailwinds for Bitcoin’s safe-haven narrative. The downside to the cryptocurrency sector is a growing discontent with the regulatory system.