Bitcoin’s recent price has carried the price action into a zone that one analyst believes was never meant to hold. The cryptocurrency climbed to $78,000 over the weekend and even pushed above $79,380 in the past 24 hours.
Technical analysis shows that in doing so, it left behind an unresolved imperfection, which is a price imbalance that markets have a well-documented tendency to revisit.
The Weekend Rally Left Behind A Debt
Crypto analyst Minga, writing on X, identified a dynamic playing out on Bitcoin’s 4-hour candlestick timeframe chart. According to the analyst, BTC is currently in the process of filling the imbalance created over the weekend. The development visible on Minga’s chart is the formation of a head-and-shoulders pattern, which is one of the most reliable bearish reversal signals in technical analysis.
The left shoulder and the head have already formed, and Bitcoin is now in the process of completing the right shoulder. The analyst identified a rejection zone between $76,800 and $77,400, which is shown on the chart below in red, as the area where that right shoulder is most likely to top out.
If this formation completes, it would signal a change from upward momentum into distribution, where larger players begin offloading positions. The neckline of this pattern sits around the mid-$73,000 region, which also coincides with a rising trendline that has supported price in recent sessions.
Where Does Bitcoin Go From Here?
This technical analysis proposes that the current push higher might only be a retest, and once the right shoulder is complete, the structure calls for a breakdown. The important level to watch on the way down is the previous monthly high, currently sitting at $76,053.
According to Minga, a rejection at the $76,800 to $77,400 red box must be followed by a break below that monthly high on the subsequent revisit. Should the pattern play out as the analyst projected, the chart points toward two notable downside reference points. The first reference point is the equal low level around $70,450, which is labeled on the chart above as a liquidity target.
Failure to break below the previous monthly high at $76,053 would invalidate the bearish scenario and give us another push toward the highs to take out the Monthly FVG above $79,000.
The second reference point is an untapped monthly imbalance of $79,388, which represents the opposing scenario. If Bitcoin instead breaks above $78,332 and acceptance is established above that level, the monthly fair value gap becomes the next logical target to the upside.
At the time of writing, Bitcoin is trading at $77,640, just above the rejection zone between $76,800 and $77,400.
Featured image from Pixabay, chart from Tradingview.com
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