Bitcoin Continues To Consolidate Following Massive Drop: A Look At The Apex Crypto Into The Weekend

Bitcoin BTC/USD was edging about 1% lower Friday on average volume, showing weakness compared to the general market, which saw the S&P 500 trading slightly higher following comments made by Jerome Powell at the Jackson Hole Symposium.

The apex crypto’s trading action saw Bitcoin forming a double inside bar pattern on the 24-hour chart. An inside bar pattern indicates a period of consolidation and is usually followed by a continuation move in the direction of the current trend.

An inside bar pattern has more validity on larger time frames (four-hour chart or larger). The pattern has a minimum of two candlesticks and consists of a mother bar (the first candlestick in the pattern) followed by one or more subsequent candles. The subsequent candle(s) must be completely inside the range of the mother bar, and each is called an "inside bar."

A double, or triple inside bar can be more powerful than a single inside bar. After the break of an inside bar pattern, traders want to watch for high volume for confirmation the pattern was recognized.

With the general market and the crypto sector often trading in tandem, a breakdown from the double inside bar pattern over the weekend could indicate the S&P 500 will fall on Monday. If that happens, volatility in the stock market is likely to increase.

Traders wishing to play the potential volatility in the stock market can use MIAX’s SPIKES Volatility products. The products, which are traded on SPIKES Volatility Index SPIKE, track expected volatility in the SPY over the next 30 days.

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The Bitcoin Chart: Bitcoin has been trading mostly sideways in consolidation since Aug. 17, when the crypto plunged over 12% at one point, falling under the 200-day simple moving average, which dropped the crypto into a potential bear cycle. On Wednesday, the crypto attempted to break higher but failed to regain support at the eight-day exponential moving average, which settled Bitcoin into a double inside bar pattern on Thursday and Friday.

• The inside bar pattern leans slightly bearish because Bitcoin has been trading lower but traders and investors can watch for the crypto to break up or down from the mother bar on higher-than-average volume to indicate future direction.
• If Bitcoin drops on Saturday or Sunday, a bounce is likely to follow because Bitcoin’s relative strength index (RSI) has been measuring in at under 30% since Aug. 16. When a stock’s or crypto’s RSI reaches or falls under that area, it becomes oversold, which can be a buy signal for short-term bullish traders.
• Bitcoin has resistance above at $27,133 and at $28,690 and support below at $25,772 and at $25,288.

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