Bitcoin approaches $26,000 mark – chart patterns show clear upward movement

The cost of buying a bitcoin could exceed $26,000, according to a textbook bullish indicator forming on the time frame chart below.

The pattern, known as a „bull pennant,“ forms when an asset forms a triangle-like structure after forming an upward flagpole. Traders see it as a signal for the continuation of the trend – that is, they believe that the asset will continue in the direction of its previous trend after breaking the triangle structure.

Bitcoin’s one-hour chart

Bitcoin forms a similar bull pennant on its 1-hour chart (1H) and shows the following characteristics:

  • Flagpole: before the pennant structure was formed, the BTC/USD price was rising. This led to the formation of a flagpole.
  • Price fluctuation: after the formation of a flagpole top, BTC/USD started to consolidate sideways while leaving behind a trail of lower highs and higher lows. This gave it the shape of a triangular structure – the actual pennant.
  • Volume: Volume decreased as BTC/USD fluctuated within the pennant.

Traders are now waiting for a break above the pennant to confirm their extended bullish bias. Should such a move occur, the upside target would shift by as much as the height of the flagpole. In the current case, the height is almost $3,200, which means that the breakout move would push BTC/USD at least towards $26,294 – measured from the apex of the pennant.

Bull pennants have a 70 percent success rate, according to a study by Samurai Trading Academy in a Bitcoin Wealth Review. Therefore, there is still a 30 percent chance that the current bullish continuation pattern could end up being invalid.

If this were to happen, the BTC/USD exchange rate would be at risk of correcting lower – again, by as much as the height of the flagpole.

This would take the pair roughly to $20,000, the previous resistance target that now serves as a support level.

Bitcoin’s weekly chart

The long-term time frame charts support the bearish corrective outlook. After posting a series of gains, the bitcoin market is now overheated.

The Relative Strength Indicator on Bitcoin’s weekly chart shows the same with its overbought signals (RSI is above 70).

Simply put, Bitcoin is trading at a higher price than its ideal bid. This typically leads to neutralizing price moves to the downside.

If that happens, the cryptocurrency risks a crash of at least 20-30 percent to bring its RSI back into the normal zone. That would automatically bring the BTC/USD price near/below $20,000.