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24 October, 2024

Bitcoin Faces Potential Correction After Bearish Engulfment Pattern Forms

24 October, 2024

Bitcoin’s Bullish Run Stumbles: Bearish Engulfment Pattern Forms

Bitcoin’s price action has taken a bearish turn after a failed attempt to break through critical resistance levels, prompting concerns about a potential correction. Analyst RLinda, in an analysis shared on TradingView, highlights a bearish engulfing pattern forming on the daily candlestick chart, suggesting a reversal of last week’s gains and a potential downward correction.

Last week’s rally saw Bitcoin surge into a strong buying zone around $68,900, but bulls were unable to push the price past the $69,000 resistance zone, encountering repeated rejections. RLinda’s analysis points to this failure as the catalyst for the bearish engulfment pattern, which emerged over the past three daily candlestick bars. This pattern, characterized by the current candle fully encompassing the previous day’s candle, is a strong indication that sellers are regaining control.

Further adding to the bearish sentiment, the recent rally appears to have been a false breakout from the descending resistance trendline in place since Bitcoin reached its all-time high of $73,737. This trendline has capped Bitcoin’s price rallies since March. While last week’s rally initially appeared to break through, the subsequent rejection suggests this breakout was not sustainable. Bitcoin has now returned to a consolidation phase just below this trendline, increasing the risk of a deeper correction.

Potential Correction Levels:

RLinda forecasts a potential correction in Bitcoin’s price, with an initial target for decline set around $65,000. If this level fails to hold, further corrections could see Bitcoin falling to $61,000, $58,000, and possibly as low as $57,000.

However, it’s crucial to note that this bearish outlook is not absolute. The bearish structure could be invalidated if Bitcoin manages to break above $69,400. A break above would solidify the bullish momentum and indicate a sustained breakout above the descending triangle.

At the time of writing, Bitcoin is trading at $66,670, reflecting a 0.6% decline in the past 24 hours. This price action aligns with RLinda’s prediction of consolidation below the descending resistance trendline. The next few days will be crucial in determining Bitcoin’s performance as we approach the end of October.

Resistance levels to watch: $66,500 and $65,000

Support levels to watch: $68,400, $69,400, and $71,500