The cost to buy one Bitcoin unit could surpass the $ 26,000 level according to a bullish textbook indicator that forms on its lower schedule chart.
Called “Bull Pennant,” the pattern forms when an asset forms a Triangle-like structure after forming an upright flag pole. Traders view it as a sign of continued bias, ie, they believe that the asset would continue in the direction of its previous trend after the Triangle structure was broken.
1H Bitcoin chart
Bitcoin forms a similar Bull Pennant on its hour chart (1H) by showing the following features:
- Flag pole: Prior to the formation of the Pennant structure, the BTC / USD exchange rate rallied higher. It led to the formation of a flag pole.
- Price Variation: After forming a flag pole top, BTC / USD began consolidating on the side while leaving a trail of lower highs and lows. That gave it the shape of a triangular structure – the Pennant itself.
- Volume: Volume declined as BTC / USD fluctuated inside Pennant.
Bitcoin Bull Pennant Structure. Source: BTCUSD on TradingView.com
Traders are now waiting for a break above Pennant to confirm their extended bullish trend. If such a step were to occur, it would move the target upside down as much as the height of the Flagpole. In the current case, the height is almost $ 3,200. That means the innovative move would push BTC / USD at least toward $ 26,294, as measured from the top of Pennant.
Bull Pennants has a 70 percent success rate, according to a study conducted by the Samurai Academy of Commerce. Therefore, there is still a 30 percent possibility that the current bullish continuity pattern may be invalid. If it did, the BTC / USD exchange rate would be at risk of lower correction – again as much as the height of the Flagpole.
That would roughly bring the pair down to $ 20,000, the previous resistance target, which is now a support level.
Weekly Chart
The long-term schedule charts support the bearish correction forecast. After logging back-to-back earnings, the Bitcoin market is now overheating. The Relative Strength Indicator on Bitcoin’s weekly chart shows the same with its over-thinking signals (RSI is above 70).
Bitcoin RSI expects the price to shrink lower. Source: BTCUSD on TradingView.com
Simply put, Bitcoin is trading at a higher rate than its ideal offer. That typically results in neutralizing price movements to the disadvantage. Should it happen, the cryptocurrency risks plummeting at least 20-30 percent to bring its RSI back to the normal domain. That would automatically bring the BTC / USD exchange rate close to / below $ 20,000.