Bitcoin: Why a Bear Trap Will Boost the King Coin?

BTC could be leaving its previously formed bear trap. A bullish divergence could set the stage for a short-term rally.

Over the past seven days, the value of Bitcoin [BTC] has declined by 7.14% while consolidating around the $26,700 region. However, the rest days could be closed, according to a tweet posted by Gert van Lagen.

Move away from Knees and Toes

According to the technical analysis specialist, BTC had formed a “perfect” head and shoulders bottom below the 200-day simple moving average (MA). This triggered a bear trap bottom in preparation for a bullish crossover.

Gert van Lagen’s tweet reads as follows:

“$BTC [1W] – Perfect Head-and-Shoulders bottom formed below the weekly SMA200. A successful double bullish retest of the neckline/SMA200. Perfect #beartrap/bottom W4 before #blowoff top/W5.”

Used by traders to identify price reversals, a bearish head, and shoulder has three peaks, with the middle one going higher than the others. In a case like this, BTC could reverse an uptrend.

However, according to Lagen’s chart, the pattern represents a bearish to a bullish trend, as the middle peak fell incredibly lower than the sides, signaling a possible end to the downtrend.

Before his last observation, the analyst had pointed to a historical trend of momentum, correction, and explosion. There he pointed out that it was the current situation of BTC.

On May 20, he told his 71,900 followers that Bitcoin could be in line for a large degree of bullish movement, as described by Elliotwave momentum:

“$BTC [1W] – Elliottwave impulse 2019-2023

Wave 1 – Impulse

Wave 2 – Correction, Sharp Zigzag

Wave 3 – Impulse, momentum

Wave 4 – Correction, Expanded Flat

Wave 5 – Impulse, Blow-off

Target Wave 5: 170-200k.”

Attempts Already Underway

Interestingly, Lagen was not the only party to share the bullish sentiment. In a May 26 post on CryptoQuant, Eralp Büyükaslan, BTC was forming a bullish divergence similar to the bearish top breakout of November 2022.

The crypto investor and analyst also pointed to the negative trade net flow as another reason for a short-term bullish move. When there is a negative value of the indicator, it means that the outputs are overwhelming inputs.

Thus, a possible outcome, when prolonged, could be a sign of accumulation. This, in turn, could turn bullish for the asset price.

From a technical standpoint, Bitcoin’s volatility appears to be contracting. Recently, particularly on May 25, the price broke out of the area where it touched the bottom of the Bollinger Bands (BB).

This move means that BTC had broken out of the oversold zone, even when the price was nowhere near the upper band. Recently, the RSI was at 43.02, up from 38.36 on May 24.

The latest news indicates that this morning, BTC was up 0.99% at $27,152. A bullish start to the day saw BTC rise from an opening price of $26,803 to a high of $27,191. BTC breached the first resistance level main (R1) at $27,008 and the second main resistance level (R2) at $27,130. Reports that US President Joe Biden and House Speaker Kevin McCarthy reached a tentative debt ceiling deal supported the early break.

Although the slight rally represents a bearish momentum movement, BTC buyers may need to neutralize the dominance of sellers to solidify the potential uptrend.

By Audy Castaneda