Bitcoin’s Head and Shoulders Pattern “Failure”: $120K Next?
The head and shoulders crowd were at it again this week – as bitcoin started breaking down below $91,000. That’s a key support level for a head and shoulders pattern that was brewing since late November (in the chart). Bitcoin had a massive rally from October, and then started stalling, so a bigger drop wasn’t out of the question.
According to classical charting theory, a head and shoulders is a “bearish reversal pattern”. And the downside target would have been about $78,000. Getting that number involves two steps:
Step 1: gauge the distance between the head and the $91,000 neckline (distance in white).
Step 2: drop that distance below the neckline (distance in red).
But now, the pattern is technically on the verge of failure. If bitcoin can close a day above about $102,500 (the top of the right shoulder), the price target works in reverse (green). That would put bitcoin near $120,000 a coin.
Why did the head and shoulders pattern fail?
Pretend you’re a big institutional investor who wants to buy a ton of bitcoin. To buy a lot of it, you need lots of sellers to soak up your buy order. If there aren’t enough sellers, you might move the price too high before filling your order – and buy in at a higher average price yourself.
When bitcoin broke below the neckline, technical traders started selling or shorting. That selling pressure gave institutional buyers, like Michael Saylor, the liquidity to buy without pushing the price higher.
This kind of thing is common in crypto. Since it’s still a relatively small asset class, “whales” must be more strategic. You can learn more about how that works in our Wyckoff Method guide.
Key takeaways
- Bitcoin’s head and shoulders pattern is on the verge of failing.
- A daily close above $102,500 could signal a move toward $120,000 (according to the theory).
- Institutional buyers typically prefer more selling pressure so they don’t move the price higher too early.
