Benzinga - Bitcoin (CRYPTO: BTC) was popping up almost 4% during Tuesday’s 24-hour trading session after bouncing off the $25,400 level earlier in the trading session.
The apex crypto reacted similarly to that level during Monday’s trading session, suggesting the area is a solid support zone and causing Bitcoin to form a double-bottom pattern.
A double-bottom pattern is a reversal indicator that shows a crypto has dropped to a key support level, rebounded, back-tested the level as support, and is likely to rebound again. It is possible the crypto may retest the level as support again, creating a triple bottom or even quadruple bottom pattern.
The formation is always identified after a digital currency has dropped in price and is at the bottom of a downtrend, whereas a bearish double-top pattern is always found in an uptrend. A spike in volume confirms the double-bottom pattern was recognized, and subsequent increasing volume may indicate the crypto will reverse into an uptrend.
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The Bitcoin Chart: Bitcoin’s test of the $25,400 level and bounce up from the area caused the crypto to print a bullish double-bottom pattern. Bitcoin’s bullish reaction to the pattern came with higher-than-average volume, which indicates the double bottom was recognized.
- Bitcoin is also trading in an inside bar pattern, with all of Tuesday’s price action taking place within Monday’s trading range. Although the pattern leans bearish, because Bitcoin was trading lower before forming it, if the apex crypto breaks up from Monday’s mother bar later on Tuesday or on Wednesday, a longer-term reversal to the upside could be on the horizon.
- If Bitcoin breaks down from the pattern, or begins to trade sideways forming a series of inside bar patterns on decreasing volume, bearish traders can watch for increasing selling to come in. If that happens, Bitcoin could back-test the 200-day simple moving average as support.
- Bitcoin has resistance above at $27,133 and $28.690 and support below at $25,772 and $25,288.
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