Very Universal Reversal Pattern in Crypto Currency Trading
To be able to analyze trading cryptocurrency technically, the following trend reversal patterns can be useful guides Like the main pillar of technical analysis, a reversal pattern allows you to visually imagine an active shift in the supply and demand for an asset. Regardless of whether you plan to trade BTC, ETH or other assets, a reversal pattern shows a change in a strong buy and sell signal, which you can use to ensure a trading position.
The reversal pattern shows that the direction of the price at this time tends to change after the pattern ends. For example, if an asset price is currently in the midst of a shrinking trend, the creation of a reversal pattern would suggest a possible new trend of improvement.
The reversal pattern that we want to discuss in this post is a very universal one found in the cryptocurrency price movements, are:
Head And Shoulders
One of the very professional Head And Shoulders chart patterns is a bearish formation that predicts a reversal of the uptrend. As the name suggests, this pattern equals the head and shoulders of a human, is the head is located above the shoulder on each side (left and right). Neckline or neckline pattern is drawn at the bottom of the left shoulder to the base of the right shoulder. In the Head and Shoulders pattern, Neckline acts like a support zone where prices are going to be confirmed to go down when they break that level.
After the price drops at the base of the neckline and the making of the right shoulder until the Head and Shoulders pattern has been fulfilled. A break from Neckline showing prices may want to continue further contraction.
The data we can have from the Head and Shoulders pattern is:
- Maybe a large uptrend is about to end and turn directly into a downtrend.
- This pattern shows early depreciation, which also means the best place to execute sell orders.
- Confirmation signal: when the price closes at the bottom of the Neckline.
- Minimum profit target: 2 times the distance between the resistance level (Head top) and Neckline.
Inverted Head And Shoulders
Sometimes said Head and Shoulders Bottom, Inverted Head and Shoulders is a bullish formation that predicts a reversal of the downtrend. As the name implies, the pattern matches the inverted head with a larger shoulder on each side. The neckline makes this pattern taken from the top of the left shoulder to the right shoulder. In the Inverted Head and Shoulders pattern, the Neckline functions like a resistance zone that must be broken before the price faces a significant increase.
As soon as the price rises above the Neckline and after the formation of the right shoulder, the pattern is about to end. This breakout shows prices may want to be even greater.
The data we can have from the Inverted Head and Shoulders pattern is:
- This pattern displays a possible reversal of the downtrend to an uptrend.
- This pattern displays early from the uptrend, and it is early to make the best buy entry.
- Confirmation signal: when the price closes above Neckline.
- Minimum profit target: 2 times from Neckline distance and the lowest point
A formation that is often intertwined at the end of a bearish market, Double Bottom is a bullish formation that predicts a reversal of a downtrend at this time. Matching the "W" form, the pattern is built by 2 parallel valleys separated by a peak in the middle. When stretched horizontally in the peak zone, the neckline of this pattern acts like a resistance area that must be penetrated by the price before going up further. The Double Bottom pattern is created perfectly when the price rises above the Neckline, and displays if possible a further price increase will be established.
Some of the data that we can take from the Double Bottom pattern is:
Showing a bearish trend reversal.
The early zone of the bullish trend, so it becomes a very fitting place to buy entries.
Signal confirmation: when the price closes above the peak between 2 valleys (local resistance).
A price formation that is often intertwined at the end of a bullish market, Double Top is a bearish formation that predicts a reversal of the uptrend. This pattern is built by 2 peaks with almost the same height, separated by the lowest point (support). When drawn horizontally at the resistance level, this Neckline pattern is a support zone that must be penetrated by the price before significant contraction occurs. This formation is perfect when the price drops at the bottom of the Neckline, and displays possible further price depreciation.
Some of the data we can take from the Double Top pattern is:
- Displays a bullish trend reversal.
- Early zone of a bearish trend, so it is a very fitting place to sell entries.
- Signal confirmation: when the price closes at the bottom of the Neckline.
Sometimes said Inverted Saucer, Top Rounding is a bearish formation that predicts a reversal of the uptrend. Easily identified as an inverted "U" form, Top Rounding is a long-term reversal pattern that generally lasts for a few weeks or months. When exploring the Top Rounding pattern, traders can also look at generally larger volume references, because the prices mapped to have a tendency to shrink.
In the Top Rounding section, TRENDLINE explores the highest peaks forming an inverted U formation. In this pattern, crypto prices will increase to the new highest level, then shrink from the resistance level to form Rounding Top. The volume generally wants to peak when the price reaches the highest level (resistance) and starts forming Lower High regularly.
Usually, Rounding Top also wants to represent a bearish future outlook for the price of a cryptocurrency. However, traders should be on guard when exploring this pattern, because the level of support can stimulate the next increase to produce another pattern (Triple Top).
Sometimes said Saucer Bottom, Rounding Bottom is a bullish formation that predicts a price reversal from a downtrend. Easily identified as "U", Rounding Bottom is a long-term reversal pattern that generally takes place in a few weeks or even months.
Rounding Bottom acts like the opposite of Rounding Up. In the Rounding Bottom pattern, the price starts with the price trend shrinking to reach the support point. Once reaching the support point, prices will begin to build up. Meanwhile, the trend line that is exploring the lowest prices is going to form U. Rounding Bottom can show a reversal which leads to a bullish prospect for the price of a particular cryptocurrency. This pattern can also be accompanied by other patterns so as to form a pattern like a double bottom, as well as a triple bottom.