Crypto market with an inverse head and shoulder pattern

A strong bullish reversal pattern identified during a significant swing low.

The inverted head and shoulders pattern

Inverse head and shoulder pattern

The inverse head-and-shoulders pattern is a dominant reversal pattern – it is also known as the head-and-shoulders-floor. I will refer to the work of the great analyst and trader Thomas Bulkowski. Mr. Bulkowski is a leading authority on chart patterns. He has published several books, the most important of which is the Encyclopedia of Chart Patterns. Mr. Bulkowski carefully back-tested and forward-tested chart patterns not only to identify their statistical averages and probabilities, but he also analyzed the general behaviors and constructions that should be observed to verify these patterns. It also has a rating scale per sample. For the inverse head and shoulder pattern in a bull market, the rating is seven out of twenty-three. For a bear market it’s six of our 19 out of 19. Number one is the best ranking. If we look at the ranking for the inverse head and shoulders pattern in a bull or bear market, we can see that this pattern is robust. In fact, Bulkowski writes that this pattern rarely fails and is extremely profitable.

The statistical averages that Bulkowski presents are very bullish. He states that after breaking the neckline there is an average increase of 38% and that the percentage of time the price takes to reach that goal is a staggering 74%. What does this mean for the cryptocurrency market? The graph above shows the total market cap for cryptocurrencies, which are currently trading just under $ 200 billion ($ 196 billion). A + 38% increase would add +73.447bn and bring the market to around +267bn. And the best part is that we have a three in four chance of this happening. But let’s look at some individual cryptocurrencies and see what a + 38% increase means for them.

Bitcoin (BTC): A + 38% gain from breaking the clipping would mean Bitcoin would gain + $ 2,758.90 to bring Bitcoin – surprise, surprise – $ 10,019.25.

Ethereum (ETH): A + 38% gain from a snippet for Ethereum adds + $ 56.16 to bring Ethereum to 203.93.

Cardano (ADA): Although not shown, Cardano’s 4-hour chart has a very transparent cutout, indicating a very quick and sharp rise if and when the cutout breaks. A cut-out break at 0.0362 would mean that + 38% would set the new Cardano price almost exactly at 0.05 straight – 0.05009906.

One question I have is: is it a coincidence that a 38% gain from the present value area creates a breakpoint near some very natural and critical resistance levels? $ 10,000 for Bitcoin, $ 200 for Ethereum, and $ 0.05 for Cardano … seems like a bit more than a coincidence. This phenomenon is not only reserved for the three cryptos listed above, but is also very consistent across the entire cryptocurrency market. Coincidence or not, we at least have a forecast level that we expect to hit this market before the end of 2019. With the transition from November to December, we should be prepared to see a significant increase in the next few weeks. I believe a return to the $ 10,000 range by the end of 2019 is certainly a predictable and conservative price target.

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