It was probably pretty difficult to trade through the New Year open without hearing about what was happening in Bitcoin. Making matters all the more interesting, even as risk factors continued to flare, Gold prices dropped precipitously while Bitcoin put in a major bullish breakout, eventually tagging the $42,000 level last Friday.

But – rarely do bullish trends translate in a linear fashion, and shortly after this week’s open Bitcoin began to pull back and, at one point, had retraced the bulk of last week’s breakout before finding some buyer support.

That bounce has now led into a round of digestion, and this digestion has shown so far in a somewhat orderly fashion, taking on the tone of a symmetrical triangle formation. Such formations will often show ahead of a breakout, as buying and selling pressure equalizes into a tighter and tighter range.

BITCOIN BTC/USD HOURLY PRICE CHART

(Click on image to enlarge)

Chart prepared by James Stanley; Bitcoin on Tradingview

BITCOIN EDGING FOR A BREAK – BUT IN WHICH DIRECTION?

Gold may have a case sample here as the extreme bullish breakout from earlier this summer has led into now five months of digestion. But Bitcoin took on a similarly overbought condition with this year’s breakout. Prices snapped back aggressively from that $42,000 level so, naturally, there are likely many that are looking at this from a pullback perspective in order to set up long positions or strategies in Bitcoin.

There may be more clearing out to do of support before that bullish look may come back in order, however, as the symmetrical wedge building after a sharp downward move can be argued as a bear pennant formation; and those types of backdrops are often followed with the aim of continuation-lower. This can put focus on support potential around the zone running from around 29,109 up to the 30k level.

BITCOIN BTC/USD TWO-HOUR PRICE CHART

(Click on image to enlarge)