According to Joshua Olszewicz, head of research at Valkyrie Investments, a price pattern called throwback has recently emerged on Bitcoin’s daily chart that could recharge bulls’ engines for a rally toward $37,000. A throwback is a price drop to a former breakout level or resistance-turned-support. After a breakout, prices rally for some days before losing upward momentum and returning to the breakout point. Thomas Bulkowski, author of Visual Guide to Chart Patterns, notes that prices often surge after the throwback is completed.
Bitcoin recently fell to around $25,000, revisiting a former inverse head-and-shoulders (H&S) neckline resistance that was breached and flipped into support in March. This 19% pullback from the mid-April high of $31,000 to a former breakout point is a classic throwback pattern. The throwback has taken the shape of a falling wedge, a pattern characterized by descending converging trendlines and a bullish reversal. Olszewicz suggests that positive resolution of the throwback measures as potentially a pivot-to-pivot trade setup from $25,000 to $37,000.
The throwback and the wedge will be invalidated if prices drop to the 200-day simple moving average (SMA) at $23,690, according to Olszewicz. He notes that extended price activity below the 200DMA would suggest a chart pattern failure and further range bound activity between $15,000 to $25,000.