Technical analysis can help judge the price movement of assets. And although chart patterns don't guarantee price action, they can lead to making more informed decisions for when or when not to trade.
Today we're looking at three popular chart patterns:
Double top
Head and shoulders
Diamond top
Double top
The double top is a technical chart pattern that can indicate a potential trend reversal in an cryptocurrency's price action.
It occurs when the price reaches a peak, pulls back, rallies again to a similar level as the previous peak, and then experiences a significant decline.
The two peaks form a resistance level, and when the price breaks below the support level between the peaks, it suggests a possible downtrend is on the way.
Crypto traders often use this pattern to make selling decisions, anticipating further price decline.
Recent BTC double top
This is known as a bearish reversal pattern. It can be difficult to spot because there needs to be confirmation with a break below support level of the neckline.
A double top tends to signal a medium or long-term trend change in a cryptocurrency's price.
Recent INJ double top
Head and shoulders
In technical analysis, the head and shoulders pattern is a common chart formation that can signal a trend reversal in a digital asset's price action.
The chart pattern consists of three peaks - the central peak is the head, and the other two lower peaks are the shoulders.
The neckline, formed by connecting the lows between the peaks, acts as a support level. When the price breaks below the neckline after the formation of the pattern, it often indicates a potential downtrend in price action.
Recent LTC head and shoulders pattern
Diamond top
A diamond top is a trading chart pattern that can occur at or near market tops and can signal a reversal of an uptrend.
This pattern is called a diamond top formation because the trend lines connecting the peaks and troughs carved out by the token's price action form the shape of a diamond.
In technical analysis (TA) a diamond top pattern can indicate a potential reversal in the price of a cryptocurrency.
It forms when the price initially rises to a peak, then starts to fluctuate between lower highs and higher lows, creating a diamond-like shape on the chart.
This pattern suggests that the previous upward trend may be losing momentum and a downward trend could follow.
Zac Colbert, The Crypto Journo
👍 Like
💬 Comment
🔃 Share
