Hammer Pattern Points to More Upside

The BTC/USD pair has been in a strong bullish trend in the past few days. 

Bullish view

• Buy the BTC/USD pair and set a take-profit at 31,000.
• Add a stop-loss at 28,000.
• Timeline: 1 day.

Bearish view

• Set a sell-stop at 28,900 and a take-profit at 26,000.
• Add a stop-loss at 31,000.

The BTC/USD pair stabilized during the weekend as investors went bottom fishing in the cryptocurrencies and tech industries. The pair is trading at 30,000, which is higher than last week’s low of 25,304.

Buying the dip

Bitcoin and other cryptocurrencies had one of the most difficult weeks on record. Their prices declined sharply as panicked investors sold their holdings. The biggest catalyst for the crypto meltdown was the collapse of Terra, the blockchain platform that created Terra USD.

LUNA, which was recently trading above $120 dropped to below $0.0002. This made it the biggest collapse in the blockchain industry considering that it had a market cap of over $64 billion.

Behind the scenes, Terra’s technology was used to build multiple DeFi platforms like Anchor protocol and Lido that had over $30 billion in assets at their peak. Therefore, the BTC/USD pair declined as investors continued to fear about the risks of contagion in the industry.

The BTC/USD pair is now rising following the strong performance of American tech stocks last week. The Nasdaq 100 index outperformed the S&P 500 as investors bought the dip. Some of the top tech stocks that did extremely well were companies like Affirm and Robinhood. In the past few months, there have been a close correlation between tech stocks and Bitcoin.

Meanwhile, investors are continuing to invest in blockchain companies. For example, during the weekend, Goldman Sachs and Barclays announced that they had invested in Elwood Technologies, a company that was started by billionaire Allan Howard. Similarly, Sam Bankman of FTX decided to invest in Robinhood. This is a sign that the two companies could decide to partner or merge.

Advertisement

BTC/USD Forecast

The BTC/USD pair has been in a strong bullish trend in the past few days. A closer look at the chart shows that the pair formed a hammer pattern on May 12th. In price action analysis, this pattern is usually a bullish sign.

A closer look also shows that it has formed a small head and shoulders pattern. It is also slightly below the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved to the neutral level at 50.

Therefore, the pair will likely continue this relief rally as investors target the key resistance level at 31,000. A move below the support at 28,000 will invalidate the bullish view.