Bitcoin price has now jumped $ 6,000 from yesterday’s low. A long wick is now left below the support, creating a Japanese candle formation known as the dragonfly doji. With an already large succession of crypto bulls, a daily close above $ 36,000 could create a reversal pattern on the charts.
But how high could the once trending cryptocurrency rise if it can hit a bottom? And is this a dead hop or a full recovery back to a bull market that the masses are waiting for?
Will a Dragonfly Doji on the Daily Make Bitcoin Fly Again?
Although so many investors in cryptocurrencies are quick to write off technical analysis as witchcraft or little more than a guessing game, there is real technology behind it.
When done right, strict rules must be followed that confirm signals, along with statistics that show what kind of outcomes to expect from the behavior. Studies have been conducted on chart patterns, indicators, and more – right down to the candlestick.
Related reading | What the final stage in the Bitcoin bull market could look like
Studying Japanese candlesticks is as easy as it gets, but that doesn’t detract from their effectiveness. The opening, closing, low and high values of each candle can provide all kinds of information about the market and the information to be expected.
For example, the dragonfly doji on the Bitcoin daily charts alone is enough to indicate that a reversal is finally here. And with the bullish episode today, a clearer reversal pattern is also forming.
A dragonfly doji could lead to the completion of a reversal pattern | Source: BTCUSD on TradingView.com
What the reversal pattern could mean for crypto
With a dragonfly doji pattern in the daily timeframe and a TD 9 buy signal in the weekly timeframe, Bitcoin bulls only have to hold out until the weekly Sunday evening candlestick and a reversal becomes much more likely.
The dragonfly doji mentioned above is the center of a nascent morning star reversal pattern. If the bulls close today’s candle and pull through tomorrow, a broader move higher is likely.
Related reading | Time to be careful: The behavior of the Bitcoin indicators mimics the historical rally
Resistance at $ 40,000 and $ 48,000 could both be potential stops before reclaiming $ 50,000. Above $ 50,000 should retest previous highs, and if these are broken this bull market correction will bottom out at $ 30,000.
At this point, it would be time to look again at trying to peak the market cycle wherever it ends. And it all could start with a dragonfly doji on daily timeframes.
Featured image from iStockPhoto, Charts from TradingView.com