Bitcoin: Tweezer Bottom Indicates A Reversal Is Possible (Technical Analysis)

Summary Bitcoin’s recent chart appears to show a textbook tweezer bottom, signaling a likely bullish reversal after its recent downtrend. If Bitcoin continues this reversal of sentiment, I expect a move higher and a potential test of prior highs in the near term. A confirmed tweezer bottom would mark strong buyer intervention and a probable shift in market sentiment toward new highs this summer. If $100K fails to hold, the bullish thesis is invalidated; price action this week should confirm whether a sustained reversal is underway. Recent price action in Bitcoin’s ( BTC-USD ) chart appears to show a textbook tweezer bottom. A tweezer bottom is a bullish reversal candlestick pattern that sometimes appears at the end of a downtrend. If this is the case, Bitcoin may be ready to make a reversal and potentially break out to new highs in the near term. For this reason, so long as Bitcoin stays above its June 6th close, and does not breach the apparent bottom it made on June 5th and 6th, Bitcoin appears ready to reverse course, move higher, and test upside resistance in the near term. Tweezer bottoms are characterized by two consecutive candlesticks that share the same low price, or very close to it, where the first is the same, low price. Here’s a breakdown of its key characteristics: The tweezer pattern has to form following a clear downtrend, which Bitcoin was in for the last few weeks, since making an all-time high in the second half of May. Recent Bitcoin Candlestick Chart (Finviz, with red notations by Zvi Bar) The tweezer bottom starts with a relatively large bearish candle that would generally indicate a continuation of selling pressure, or possibly a sizable capitulation. That move is immediately followed by a bullish candle that is usually of similar size, but what matters most is that its low point is in line with the prior bearish candle. This indicates that despite initial selling pressure evidenced by the bearish move, buyers stepped in at the same price point and prevented further declines before moving the price higher. These consecutive matching lows are likely to mark a strong level of support that implies sellers attempted to push price lower, and that this push lower was rejected. As a result, a tweezer bottom represents a probable reversal of the recent trend down, and a move higher in the near term. If this most recent action is indeed a tweezer bottom, a change in market sentiment through the next few weeks is probable. 1-Year Bitcoin Candlestick Chart (Finviz with red notes by Zvi Bar) It is apparent that a reasonable level of seller exhaustion occurred. Bitcoin had downward momentum since making a top in the middle of May, and faced downward pressure since failing to break through apparent resistance around $111,000, or around its all-time high. The downward momentum within the first bearish candle of the tweezer bottom then faced significant opposition at just above $100,000, and sellers were unable to push Bitcoin lower. The subsequent bullish candle indicates and/or confirms buyer intervention. Bouncing off the same low demonstrates that buyers consistently and likely aggressively stepped in at that level, absorbing selling pressure and reversing price direction. This indicates a return of buying interest and a potential shift in market sentiment. The matching lows also create a strong level of support that appears likely here to signify a near term price floor from which Bitcoin could jump-start a recovery. The confirmation of whether the move last week was a tweezer bottom comes from the subsequent price action. A sustained move higher after the apparent formation validates a reversal. Similarly, the tweezer bottom’s support should also subsequently act as support on another move downward, and become a critical level where buyers must successfully defend against further price depreciation, or a continuation and potential acceleration of the pre-existing downtrend becomes exceedingly probable. If Bitcoin has, in fact, formed a tweezer bottom, this may represent a significant development for sentiment around Bitcoin and the potential for it to make new highs this summer, and possibly even before summer’s technical start. Risk While this pattern may suggest that a critical low was established as support, and that selling pressure has waned, it is also possible that the level of support created by the apparent tweezer bottom shall not hold. It could be the case that the second candle’s bullish appearance was due to other temporary forces, such as Friday’s weekly options expiration or the capricious influences of recent government actions. Other influences would include changes to interest rates, dollar weakness, and general sentiment towards competing safe haven and alternative assets. In either case, it should be expected that market activity this week will confirm whether this is, in fact, a tweezer bottom, and continued upside momentum should be expected, or if this was a temporary respite to be followed by further declines. Conclusion I believe it is highly likely that Bitcoin just made a tweezer bottom that will act as a strong level of support, and it is likely that Bitcoin is at the start of a reversal that will test its prior high. If Bitcoin cannot hold $100K, it would invalidate this theory and indicate continued selling pressure. If Bitcoin confirms the tweezer bottom in the coming days, it is also reasonably likely that Bitcoin can make a new high in the near term, and potentially move considerably higher.

Source: Seeking Alpha