Is Bitcoin's next stop $75.000? Head and shoulders pattern signals danger ahead

Check our previous analysis: 'Did Bitcoin top out at $1,08,367? Critical levels to watch' to understand the larger picture and how the current scenario unfolds. 

Overview

Bitcoin recently topped out at 108,367 and initially dropped to a low of 92,209, following which it entered a sideways consolidation between 99,872 and 92,200. The price briefly breached this range to make a short-term low of 91,378, then rebounded towards the 99,000 mark. Currently, Bitcoin appears to be unfolding Wave 2 as a complex correction, aligning with a classic Head & Shoulder (H&S) chart pattern.

Head and shoulder pattern analysis

• Left shoulder: Formed near 99,662.

• Head: At the peak of 108,367.

• Right shoulder: Currently developing under 99,872.

The neckline for the pattern lies at approximately 92,200.

Bookish Target: Using the vertical distance from the head to the neckline (108,367 - 92,200 = 16,167), the projected downside target after breaking the neckline would be: 92,200 - 16,167 = 76,033 (approx. 75,000 zone).

Key levels to watch

1. Resistance zones:

   • 99,000 - 100,000: Strong resistance zone.

   • Any failure to break above this will likely confirm bearish momentum.

2. Support levels:

   • 91,378 (recent low): A decisive break below this will validate the pattern.

   • 85,000 - 75,000: Next logical supports if the neckline at 92,200 is breached.

3. Line in the sand (stop losses):

   • For bearish positions, above 100,000 invalidates bearish setups.

   • For bullish positions, a close below 91,378 invalidates the upward momentum.

Trading strategies

Bearish strategy (H&S pattern confirmation):

• Entry: Short below 91,378, targeting the neckline breach.

• Stop loss: Above 99,872 (right shoulder high).

• Targets:

  1. 85,000 (initial support zone).

  2. 75,000 (H&S target).

Bullish strategy (breakout above 100K):

• Entry: Long above 100,000, targeting new highs.

• Stop loss: Below 98,500.

• Targets:

  1. 105,000 - 108,000 (previous highs).

  2. Extension targets based on bullish momentum.

Neutral approach (range play):

• Long position:

  • Buy near 92,200 - 91,378 (neckline support).

  • Target: 98,500 - 99,000 (range resistance).

  • Stop loss: Below 90,500.

• Short position:

  • Sell near 99,000 - 100,000 (resistance zone).

  • Target: 92,200 - 91,378 (range support).

  • Stop Loss: Above 100,000.

Expected scenario

1. If Bitcoin decisively breaks below 91,378, it would signal the activation of the Head & Shoulder pattern with potential downside towards 85,000 - 75,000.

2. If bulls reclaim 100,000, it would invalidate the bearish setup and open the door for further upside to retest 108,367 and possibly beyond.

Caution: Any rejection between 99,000 - 100,000 could be an early signal of a downside move. Be vigilant at these resistance levels.

Conclusion: The market remains highly sensitive around the 99,000 - 100,000 resistance zone and 91,378 support. Adopting a disciplined approach with stop-loss levels is essential to navigate this volatile phase effectively.