I have been somewhat skeptical of the recovery we have been witnessing from Bitcoin and the crypto market as a whole but I am now seeing some signs that make me wonder if I have been a little too skeptical. Looking at the Bitfinex price chart on the hourly time frame it looks to me as if BTC is in the process of completing an inverse head and shoulders pattern. Time will tell if this is truly as bullish of a sign as it appears, also we will see if BTC can break above the neckline and continue the uptrend or if it will fail and head lower. Another bullish sign that I see is on the weekly time frame, to me, it looks like a morning star reversal pattern.
Typically with other morning star reversal patterns, I have seen on stocks, there will be a gap down on the "star" day and sometimes also a gap up on the bullish candle (3rd candle of the pattern) but because the crypto markets never close gaps rarely if ever happen. I realize this might not fit the textbook definition but it looks pretty good to me. I also realize that this week has a way to go before the candle will close so although it looks pretty good right now, if BTC fails to keep pushing higher here and heads lower the pattern would change dramatically. I will be watching the progression of both patterns to see if they really are as bullish a sign as they appear to be right now.
DEFINITION of 'Morning Star'
A morning star is a bullish candlestick pattern that consists of three candles. The first bar is a large black (bearish) candlestick located within a defined downtrend, the second bar is a small-bodied candle (either black or white) that closes below the first black bar, and the last bar is a large white candle that opens above the middle candle and closes near the center of the first bar's body.
1) The longer the black candle and the white candle, the more forceful the reversal. This demonstrates a more severe change in investor sentiment.
2) The more indecision that the star day illustrates, the better probabilities that a reversal will occur, such as a Doji signal.
3) A gap between the first day and the second day adds to the probability that a reversal is occurring. A gap before and after the star day is even more desirable.
4) The higher the close of the third day, coming up past the middle point of the black candle of the first day, reveals more potential in the strength of the reversal.
Typically with other morning star reversal patterns, I have seen on stocks, there will be a gap down on the "star" day and sometimes also a gap up on the bullish candle (3rd candle of the pattern) but because the crypto markets never close gaps rarely if ever happen. I realize this might not fit the textbook definition but it looks pretty good to me. I also realize that this week has a way to go before the candle will close so although it looks pretty good right now, if BTC fails to keep pushing higher here and heads lower the pattern would change dramatically. I will be watching the progression of both patterns to see if they really are as bullish a sign as they appear to be right now.
DEFINITION of 'Morning Star'
A morning star is a bullish candlestick pattern that consists of three candles. The first bar is a large black (bearish) candlestick located within a defined downtrend, the second bar is a small-bodied candle (either black or white) that closes below the first black bar, and the last bar is a large white candle that opens above the middle candle and closes near the center of the first bar's body.
1) The longer the black candle and the white candle, the more forceful the reversal. This demonstrates a more severe change in investor sentiment.
2) The more indecision that the star day illustrates, the better probabilities that a reversal will occur, such as a Doji signal.
3) A gap between the first day and the second day adds to the probability that a reversal is occurring. A gap before and after the star day is even more desirable.
4) The higher the close of the third day, coming up past the middle point of the black candle of the first day, reveals more potential in the strength of the reversal.