One of the simplest patterns in technical analysis is the triangle pattern and looking at Bitcoin today, we can easily see how a descending triangle is being formed.
Over the past couple of months, the price of bitcoin has been trending lower however from the below chart we can easily spot that the level of around 5,600 has been acting as a brief resistance first (in October last year) which has since than turned as a support level.
Since February of this year, we have also seen a descending triangle being formed with several breakout attempts that have all failed. For this type of triangle to form, we need to have a bearish trend showing lower highs but with consistent equal low points. Furthermore, the upper resistance line needs to be moving lower towards support (i.e. converging towards each other).
Generally speaking, the breakout from the triangle is around 70%-80% of the completion of the triangle and it seems that we are pretty close for that.
As per classic text book definition, Descending triangles are normally considered a continuation pattern and hence we should continue with the downtrend. There are instances however, that these are considered as reversal patterns and this is what we are looking here.
Observing the chart and this particular pattern, it might be an interesting entry point for a short-term long trade without of course forgetting to put in stop losses due to the extreme volatility of this asset class. We have also previously mentioned in another article an important decision that needs to be taken by the Security Exchange Commission (SEC) in September with regards to the first ever Exchange Traded Fund which, if approved, will be surely positive for the crypto currency world.