Sat. May 30th, 2020

Bitcoin rising wedge: measuring potential price objectives

3 min read

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In a recent article published on 6th April, a potential rising wedge pattern formation was identified.

What is a rising wedge pattern?

A rising wedge begins with a wide bottom and gradually narrows as the price moves higher. In other words, the trading range narrows as the price makes a series of higher highs and higher lows. An ascending wedge pattern is best analyzed using a weekly price chart.

Is a rising wedge pattern bearish?

Yes. What you need to know about a rising wedge is that it is mostly a bearish signal. During downtrends, it usually signals a continuation whereas in uptrends it typically signals that a reversal is underway.

Trading volumes at the beginning of the wedge usually start high and then gradually weaken as the pattern develops. Trading volumes will usually shoot up at the time the breakout occurs.

How do you measure a potential target price for a rising wedge pattern?

The price objective is calculated subtracting the targetted move from the breakout point.

i. Calculating the targetted move

The targetted move is calculated by subtracting the trough price from the peak price within the wedge pattern.

The lowest (trough) price for BTCUSDT on Binance was $3,782 whereas the highest (peak) price reached so far within the rising wedge pattern is $7,454. However, the price of Bitcoin may continue to rise within the wedge pattern to reach a new peak price of $8,000. Therefore:

A: Assuming the peak Bitcoin price within the existing rising wedge pattern remains $7,454 a targetted move of $3,672 could materialize ($7454 – $3782);
B: Assuming the peak Bitcoin price within the existing rising wedge pattern is $8,000 a targetted move of $4,218 could materialize ($8000 – $3782);

On a side note, we point out that there is a CME price gap residing between $8,280-$9,060. This means that if the price of Bitcoin manages to hit $8,280, a rally all the way up to the $9,000 could very well develop – so this is something to be aware of and of course watch out for!

ii. Estimating the potential breakout point

The breakout point resides along the lower (support) line of the rising wedge, and this could be anywhere between $7,000 and $7,500. Let’s just say $7,000 for simplicity.

iii. Scenario for Potential Price Objectives

The price objective or the move that is projected down from the breakout point of $7,000 would, therefore, be as follows:

A: $3,328 (breakout point of $7,000 less targetted move of $3,672)
B: $2,782 (breakout point of $7,000 less targetted move of $4,218)

The above suggests the price of Bitcoin is at risk of falling to $2,782 – $3,328. Of course, nobody has a crystal ball and these scenarios are based on the above rising wedge assumptions panning out. Either way, now you know how to measure the potential price objective for a rising wedge pattern on your own.

We hope you found this rising wedge tutorial interesting and educational.

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