The head and shoulders pattern has clearly defined rules that indicate exactly what it is. When the pattern is complete, there should be a clear left shoulder and right shoulder, plus the head must be higher than both of the shoulders. Usually the right shoulders top, can be slightly higher than the left shoulder. Finally, on both sides of the head, there are two troughs, there should be a slightly higher right trough than the left.
As you can see from my magnificent drawing, the rules are quite simple. The head must be higher than both shoulders and the right shoulder is slightly higher than the left. If you see a patter like this emerging, it’s best to sell at the top of the right shoulder and possibly short.
Many bearish people online have been saying that bitcoin has just hit the head and shoulders pattern, which is a bearish signal, but that may not be the case. When I have a look at the chart today, it is definitely not a head and shoulders pattern, 100% not.
Strangely, it still looks like it could turn to the upside again. The world is still in turmoil, people are losing their jobs, governments are continuing lockdowns and becoming more authoritarian. Add all these problems in the world together with inflation and you get smart people trying to protect their wealth by throwing it into bitcoin, no matter how overpriced it may be right now.
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