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 rate expectations and other fundamental catalysts that resulted in a leap in price action, gaining over 70%. Question is, will bulls hold onto 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.
Although this article focuses on the technical drivers of price action, our fresh Q2 guide provides an in-depth overview of fundamental factors that could contribute to determining the underlying trend.
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How will Bitcoin react to the fundamental backdrop in Q2?
Summary of Q1 Price Action:
- January (long, full-bodied candle) – Bitcoin prices surge, rising by nearly 40% before running into a barrier of resistance around the September 2022 high of $22,781.
- February (prices open and close around the same level, just above the September 2022 high) – In technical analysis, the doji is a single-candlestick pattern that develops when a narrow-body forms in the middle of the monthly range (Feb high and low). As bulls and bears fail to gain traction, prices settle around the monthly open, suggestive of indecision.
- March (full-body candle with long lower-wick) – With the failure of the above-mentioned banks boosting the demand for Bitcoin, prices pushed through another big level of prior resistance now holding as support at the 50-month MA (moving average).
Bitcoin (BTC/USD) Monthly Chart
By homing in on the medium-term fluctuations in prices, the weekly chart can assist in highlighting additional levels of support and resistance. After a brief retest of the 200-day MA (just above the psychological level of $25,000) prices suffered a mild pullback, forcing BTC lower. However, with the failure of SVB triggering another rally, Bitcoin ripped higher before setting a new 2023 high of $28,936.
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This resulted in what is known as the rising three methods pattern (a five-candlestick pattern that indicates a continuation of the existing uptrend).
Bitcoin (BTC/USD) Weekly Chart
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 remain in control of the short and longer-term trend. Above that lies another key level of historical resistance at the psychological level of $32,000 and then the mid-point of the above-mentioned move at $36,425.
However, if fundamental factors 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 high, a break of which could drive prices back to the December 2017 high at $19,666.
— Written by Tammy Da Costa, Analyst for DailyFX.com
Contact and follow Tammy on Twitter: @Tams707