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Bitcoin price is still struggling to hold onto support at $30,000 on high timeframes after smashing through it more than a week ago now.
With buyers stepping in after the plunge, there is a chance for bulls to stop the downside with a bullish reversal candlestick setup. Learn more about the potential setup and find out if it’s “hammer time”.
A Bullish Hammer Could Put A Stop To The Bear Market
You wouldn’t necessarily know it by the ultra bearish sentiment or the recent plunge and resulting panic across the crypto market.
But if you look at medium timeframe price charts, Bitcoin bulls could be preparing out a stop to the bleeding and stage a bullish hammer reversal.
Related Reading | This Expanding Triangle Pattern Could Be The Last Hope For Bitcoin Bulls
Japanese candlesticks are said to be developed by the so-called “God of Markets,” Honma Munehisa. Homna was a rice trader and wrote the first ever book in market psychology.
Candlesticks are comprised of a body and shadow, often called a wick. They are typically depicted as red and green, or white and black (open and closed). Each candle includes information on the open, close, low, and high of the trading session it represents.
How the candle opens, closes, and the highs and lows set during the session will shape the candle, and often provide information about what might be going on in the market — and what might come next.
Could this hammer put a stop to bears? | Source: BTCUSD on TradingView.com
The Technicals Supporting A Bitcoin Reversal Setup
On BTCUSD weekly and 2-week timeframe charts, the top cryptocurrency is working on a bullish hammer. A bullish hammer is a characterized as having a long lower wick acting as the handle, a small upper body, and little to no upper shadow.
Although the bullish signal only takes one candlestick to suggest a bottom is in, it is only confirmed with a strong follow through back to the upside.
There are plenty of technicals supporting a reversal | Source: BTCUSD on TradingView.com
Hammers are most effective when they follow a string of at least three down candles, and are supported by bullish technicals.
The bullish hammer is happening at what could be the end of a wave 4 expanding triangle correction, according to Elliott Wave Principle. The MACD is retesting the zero line, much as it did during the wave 1 Black Thursday correction. Each bottom, also coincidentally touched the lower Bollinger Band before reversing to the upside.
Related Reading | Bitcoin Bear Market Comparison Says It Is Almost Time For Bull Season
Will this bullish hammer confirm, and stop the bloodbath from continuing?
— Tony "The Bull" Spilotro (@tonyspilotroBTC) May 15, 2022
Follow @TonySpilotroBTC on Twitter or join the TonyTradesBTC Telegram for exclusive daily market insights and technical analysis education. Please note: Content is educational and should not be considered investment advice.
Featured image from iStockPhoto, Charts from TradingView.com
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.