The classic technical indicator predicts another massive Bitcoin price drop with a target of $ 16,000

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Bitcoin (BTC) has rallied more than 25% after it did during the crash of the 19th, but cryptocurrency is still on the rise as another period of strong sell-offs may occur due to a classic technical indicator pattern.

Bitcoin price in a “bearish pennant”

The pattern is known as a “bearish pennant” when an asset consolidates after a sharp downward move to form a small symmetrical triangle-like price range. He breaks the area support and continues to move down. Traders usually estimate the size of the negative breakout move by measuring the size of the previous move.

Bitcoin is currently trading within a similar bearish pennant structure that fluctuates sideways as it forms a series of lower highs and higher lows. Meanwhile, its consolidation structure is preceded by a massive downward trend to around $ 20,000. If the BTC / USD exchange rate falls below the pennant structure and is accompanied by increasing trading volumes, the likelihood of a crash is high by nearly $ 20,000.

The declining outlook also borrows clues from Bitcoin’s recent rally. It’s worth noting that the cost of buying 1 BTC fell from nearly $ 65,000 to $ 30,000 – or by over 50% – on May 19, followed by a sizable 30% increase.

The Bitcoin pennant structure and its primary downside target. Source: TradingView

In the meantime, the market analyst Income Machine warns of a “dead cat bounce” scenario on the Bitcoin market and notes that upcoming rallies in BTC / USD due to further selling pressure near the highs of the 26th. It recommended traders to move out of their bullish positions near $ 40,000.

In addition, Income Machine also noted that a failure to hold $ 30,000 as support would risk Bitcoin prices plummeting to $ 16,200 – a level in line with the bearish pennant target. The analytics firm selected $ 16,200 as support during the November-December 2020 meeting due to its historical relevance.

Bitcoin bearish outlook presented by Income Machine. Source: TradingView

“Conversely, a break from the May 26 highs on the upside would cause us to reverse our analysis and assume a more bullish outlook for BTC-USD,” added Income Machine analysts.

Pankaj Balani, CEO and co-founder of the crypto derivatives exchange Delta, also expected a prolonged bearish collapse should Bitcoin prices close below $ 34,000. Even so, the former UBS official capped his downside target to $ 28,000, the lowest level for 2021. He told Cointelegraph:

“Traders would be eager to watch these levels before taking decisive action. However, the risk to the bulls remains higher than that of the bears as longer-term price action is down.”

Bullish outlook

Balani also noted that the current price action means demand in the $ 30,000 to $ 35,000 range. Therefore, an upward swing out of the aforementioned range could cause the bearish pennant – which Balani calls a symmetrical triangle – to break upward.

“BTC forms a classic symmetrical triangle and any breakout / breakdown will result in significant price movement,” he said, adding:

“When BTC finally breaks above the $ 40,000 mark, expect a spike to $ 45,000.”