Classic price indicator says “Bitcoin could drop to $16,000”

Bitcoin (BTC) price recovered more than 25 percent after falling as low as $30,000 on May 19. However, based on a traditional technical indicator data, the cryptocurrency is likely to face new selling pressure.

Bitcoin price inside the ‘bear pennant’

The technical pattern, called a “bearish pennant”, is observed when the price of an asset consolidates after following a strong downward move and forms a small symmetrical triangle-like price range.

If there is a break below the support in this formation, traders usually expect a drop on the scale of the high of the previous move.

Bitcoin is currently trading within a similar bear pennant. While the bottom prices are rising relatively, the hills are going down. According to this model, if the BTC/USD pair falls below the pennant structure and the trading volumes follow the trend in this process, the probability of falling to $20,000 will increase.

Meanwhile, it is worth noting that the cost of purchasing 1 BTC fell from almost $65,000 to $30,000 on May 19, a 30 percent jump after seeing a drop of over 50 percent.

Bitcoin pennant structure and the negative target of the pennant pattern. Source: TradingView

Market analysis service Income Machine has warned of the possibility of a “dead cat bounce” scenario in the Bitcoin market. He made a statement that the rallies to be seen in the BTC/USD parity will be limited by the selling pressure that will occur. In his statement to investors, he suggested they close their positions around $40,000.

Income Machine also noted that if the $30,000 support fails, Bitcoin price risks falling to $16,200. The analytics firm points to $16,200 to work as a support during the November-December 2020 period.

Bitcoin downtrend chart by Income Machine. Source: TradingView

Income Machine analysts also added, “Exceeding the peaks observed on May 26 paves the way for us to reverse our analysis and look more optimistically for the BTC/USD pair.”

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