Candlestick patterns suggest bullish continuation is possible in Q2

Bitcoin Technical Outlook: Candlestick patterns suggest bullish continuation is possible in Q2

In the first quarter of 2023, Bitcoin (BTC/USD) benefited from a reduction in interest rate expectations and other fundamental catalysts that resulted in a leap in price action, with an increase of over 70%. The question is, will bulls stay in control and drive prices to pre-war levels?

From a technical standpoint, the last three candlesticks on the monthly chart represent the first quarter’s price action.

While this article focuses on the technical drivers of price action, our recent Q2 guide provides an in-depth look at fundamentals that can help determine the underlying trend.

Summary of price action for the 1st quarter:

• January (long, full candle) – Bitcoin prices are rising and rising by almost 40% before running into a resistance barrier around the September 2022 peak at $22,781.
• February (prices open and close around the same level, just above the peak in September 2022) – In technical analysis, the doji is a single candlestick pattern that develops when a narrow body forms in the middle of the monthly interval (February high and low). As bulls and bears fail to gain traction, prices settle around the monthly open, suggesting indecision.
• March (full body light with long lower wick) – With the failure of the above banks increasing demand for Bitcoin, prices pushed through another major level of previous resistance which is now holding as support at the 50-month MA (moving average).

Bitcoin (BTC/USD) Monthly Chart

Source: TradingView

By looking at the medium-term swings in prices, the weekly chart can help highlight additional levels of support and resistance. After a brief retest of the 200-day MA (just above the $25,000 psychological level), prices saw a mild pullback, forcing BTC lower. However, when the SVB failed which triggered another rally, Bitcoin surged higher before setting a new 2023 high of $28,936.

This resulted in what is known as the rising three-method pattern (a five-candlestick pattern indicating a continuation of the existing uptrend).

Bitcoin (BTC/USD) Weekly Chart

Source: TradingView

Bitcoin (BTC/USD) – Looking Ahead: Technical Levels to Watch in Q2, 2023

Over the next 12 weeks, changes in sentiment could drive Bitcoin prices in either direction. With prices currently trading around the 61.8% retracement of the 2020 – 2021 move ($28,737), bulls will need to hold above this level to retain control of the short-term and long-term trend. Above that lies another key level of historical resistance at the psychological level of $32,000 and then the midpoint of the above move at $36,425.

However, if fundamentals weigh on price action, BTC could fall back to $27,000 before plunging to the next level of support at the 200-week MA (currently at $25,460). Below that is the September 2022 peak, a breach of which could take prices back to the December 2017 high of $19,666.

— Posted by Tammy Da Costa, Analyst for DailyFX.com

Contact and follow Tammy on Twitter: @Tams707