Bollinger Bands Inventor Foresees Bitcoin Pullback: Key Levels To Watch
May 22 2024 - 6:00AM
NEWSBTC
Renowned financial analyst John Bollinger has recently issued a
caution regarding the potential for a Bitcoin pullback. After BTC
price surged from below $66,000 to almost $72,000 at the beginning
of the week, Bollinger, the creator of the widely utilized
Bollinger Bands indicator, pointed to specific features in the
Bitcoin price chart that suggest a consolidation or pullback could
be imminent, though he clarified that his perspective was not
bearish on a longer term. The Bearish Argument By John Bollinger
Bollinger’s analysis focuses on the daily BTC/USD chart. His main
concern centers around a “two-bar reversal” pattern observed at the
upper Bollinger Band. This pattern, typically indicating a
potential reversal in price direction, occurs when Bitcoin’s price
first exceeds the upper Bollinger Band but then closes within it
during the next trading period. Such movements can imply that the
upward momentum might be losing strength. The Bollinger Bands on
the chart consist of three lines: the lower band, the middle band
(20-day simple moving average), and the upper band. These bands
expand and contract based on price volatility, with the upper and
lower bands set two standard deviations away from the middle band.
The Bitcoin price peaked at approximately $71,977 on Tuesday,
momentarily pushing above the upper Bollinger Band before closing
back within it, forming the noted reversal pattern. Related
Reading: Bitcoin ETF Inflows Soar To Highest Level In Months As BTC
Price Surges Past $68,000 Further analysis shows the 20-day moving
average, the middle Bollinger Band, which currently sits at about
$64,564 and acts as a potential support level in the event of a
price decline. Historical data from the chart indicates crucial
resistance near the recent highs around $71,500, while support
levels could be seen around the $64,500 mark, where the middle
Bollinger Band lies, and further at $58,300, coinciding with the
lower band. The expansion of the Bollinger Bands indicates
increased market volatility, particularly as the price tests
resistance levels. The Relative Strength Index (RSI) is currently
just at 63, which is not yet in the overbought territory. In his
commentary, Bollinger has clearly stated that while the setup is
not fundamentally bearish, the observed technical pattern warrants
caution for short-term traders. He advises monitoring for either a
consolidation period where the price stabilizes, or a pullback
where it retreats from recent highs. “I am not fond of the two-bar
reversal at the upper Bollinger Band for BTCUSD. Suggests a
consolidation or a pullback. Not bearish here, just short-term
concerned,” Bollinger remarked. The Bullish Argument On the
contrary, renowned crypto analyst, Josh Olszewicz (@CarpeNoctom),
shared a bullish outlook on Bitcoin through a different lens,
focusing on the Ichimoku Cloud indicator in the daily chart. He
highlighted a “Bullish TK Cross with Price Above Cloud” on the
daily Bitcoin chart. Related Reading: Analyst Says $71,000 Bitcoin
Move Is Only Halfway Through, Here’s Why This particular pattern is
significant within the realm of technical analysis, especially for
those employing the Ichimoku Kinko Hyo indicator, a comprehensive
tool that provides insights into market momentum, trend direction,
and support and resistance levels. The “Bullish TK Cross” Olszewicz
refers to occurs when the Tenkan-sen line (a short-term moving
average) crosses above the Kijun-sen line (a medium-term moving
average), indicating a potential uptrend. Typically, this crossover
suggests that buying momentum is increasing and can signal the
start of a bullish phase. The significance of this bullish signal
is further enhanced by the fact that the price of Bitcoin is above
the “Cloud” or ‘Kumo’, which is considered an area of future
support or resistance. When the price is above the cloud, it’s
generally viewed as a bullish signal, suggesting that the asset is
in a strong uptrend and likely to continue as such. This setup
provides a clear bullish scenario that contrasts with the
short-term caution suggested by John Bollinger’s analysis. At press
time, BTC traded at $69,846. Featured image created with DALL·E,
chart from TradingView.com
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