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Bitcoin price action raises concerns after a failed attempt to break past critical resistance levels. while bearish signals are now emerging. According to an analysis shared by analyst RLinda on TradingView, Bitcoin could be on its way to reversing last week’s gains and correcting heavily due to the formation of a bearish engulfing pattern.
Failed push above $69,000 marks a bearish reversal for Bitcoin
R Linda’s analysis of the Bitcoin price trajectory is based on a new bearish engulfment candlestick pattern developing in the daily candlestick time frame. Last week, Bitcoin had a remarkable rally that pushed the cryptocurrency forward a strong buying zone approximately $68,900.
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Despite the bullish momentum, Bitcoin bulls were unable to push the price through the $69,000 resistance zone, repeatedly getting rejected as the cryptocurrency pushed towards this level.
RLinda’s analysis noted this inability to move up led to the formation of a bearish engulfment pattern over the past three daily candlestick bars, which could be a sign that the sellers are regaining control.
The bearish engulfment pattern, where the last candle completely engulfs the previous day’s candle, is a strong reversal signal indicating that upward momentum has exhausted itself. This pattern, combined with the inability to reach the $69,000 zone, indicates that Bitcoin may be in for a deeper correction.
RLinda’s goes further, highlighting that the recent rally appears to have been a false breakout from the descending resistance trendline that has been in place since Bitcoin hit its all-time high of $73,737. The descending trendline has acted as a ceiling for Bitcoin price increases since March. Although last week’s rally initially appeared to break through, the subsequent rejection suggests the breakout was not sustainable.
Given this, the analyst notes that Bitcoin has done just that has now returned to a consolidation phase just below this trend line. As Bitcoin continues to consolidate, it increases the risk of a deeper correction.
How far can a Bitcoin price correction go?
Looking ahead, RLinda foresees a potential correction in Bitcoin’s price, with the initial target for a decline being around $65,000. Should this level not hold, further corrections could see Bitcoin fall to $61,000, $58,000 and possibly even $57,000.
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However, this bearish outlook is not set in stone. RLinda adds that the bearish structure could be negated if Bitcoin manages to break above $69,400. A break above would secure bullish momentum and a sustained breakout above the descending triangle.
At the time of writing, Bitcoin is trading at $66,670, down 0.6% in the past 24 hours. The current price action is consistent with RLinda’s prediction of consolidation below the falling resistance trend line.
In the meantime, the coming days could determine how much Bitcoin closes October (through) in the green zone. The resistance levels to watch are $66,500 and $65,000, while the support levels to watch are $68,400, $69,400, and $71,500.
Featured image created with Dall.E, chart from Tradingview.com