Cup and Handle formation on Bitcoin chart could push the price higher

What a brutal sell-off that was?

Bitcoin Dropped around 15% in last three days. World’s largest cryptocurrency dropped to 8550$, filled CME GAP, and bounced from 8550$ and currently trading above 8800$. Despite of this brutal sell off, we still think Bitcoin has chances to recover from here and make a new high in coming days.

Let’s discuss technicals to understand why do we think bitcoin can make a comeback.

Bitcoin Technical Analysis

Cup and Handle formation

We have spotted a cup and handle formation on Bitcoin Daily chart, which is a bullish continuation pattern.

What is cup and handle formation

The Cup and Handle pattern is characterized by two distinct features. First, there is a “U” shaped chart pattern which is considered “The Cup”. The Cup is followed by a slight consolidation or downtrend which forms “The Handle.” The pattern is considered to be a bullish continuation pattern.

Key aspects of the Cup and Handle Pattern

1. Trend: Because the Cup and Handle is ultimately a continuation pattern, it should be preceded by an uptrend. Typically this trend would be around a few months old.
2. Cup: The cup should be a “U” shape with valid support levels at the bottom.
3. Cup Depth: Remember, the cup shape is a retracement of a previous advance.
4. Handle: After the formation of the right side of the cup, the handle is formed.
5. Volume: Volume should follow along rather closely with the shape of the cup as it is being formed.
6. Duration: The duration of the pattern can vary greatly.

Findings

• In the above mentioned chart, we can see A Cup and handle formation has been completed.
• Bitcoin retested the major uptrend channel at 8550$, and currently price is holding above this major support.
• To validate the cup and handle formation, Bitcoin needs to hold 8550$ as a daily support.
• Bitcoin needs to record ascending growth in buying volume to validate this formation

Opinion

In our opinion, Bitcoin needs to save monthly candle first – which looks terrible right now. We wan to see the current monthly close above 9500$, and 8550$ should hold as a daily support. If both these conditions can match than we can see a successful cup and handle formation breakout which can lead the price to 12000$ in coming days.