Last night’s Bitcoin monthly April candle closed as a bullish engulfing, often considered a reversal candle by traders and analysts.
Bulls must beware, however, as one of the most respected top technical analysts recommends not trading this setup when the primary trend is down, as more often than not it leads to another devastating crash.
Bitcoin April Monthly Closes As Bullish Engulfing
In March, a day now dubbed Black Thursday caused Bitcoin to erase nearly all gains over the last year and a half of price action.
The record-breaking collapse took the first-ever cryptocurrency to below $3,800.
But this week, Bitcoin price rocketed to over $9,500 in a dramatic push from extreme lows. The rally continued through the monthly close, causing the leading crypto asset by market cap to form a bullish engulfing candle on the monthly timeframe.
The highest timeframes are the most effective signals, typically, so the crypto market is rightfully feeling bullish once again, especially with Bitcoin’s halving less than two weeks away.
Google Trends are already skyrocketing alongside the price of the crypto asset, potentially signaling the start of another bull market. But one expert focusing on chart patterns warns that the signal isn’t worth trading.
Not So Fast, Says Thomas Bulkowski, Chart Pattern and Technical Analysis Expert
Thomas Bulkowski is a world-renowned technical analysis who has released a number of books on chart patterns and has completed extensive statistical research across thousands of charts to find out the success rate of certain signals.
He has put together metrics on how far prices move after patterns confirm, how far the price will throwback to test support, and much more.
If anyone can speak with authority on which patterns are worth trading, it’s Bulkowksi. He’s even penned full encyclopedias on the subject.
On his website, called The Pattern Site, Bulkowksi explains that a bullish engulfing candle acts as a reversal 63% of the time. At first glance, that sounds incredibly bullish.
And while it is in the short term, Bulkowksi warns that when the primary trend is down, bullish engulfing candles are very short-lived, and are often followed by another drop.
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The same thing happened in the past in June 2018. Next, a three black crows pattern completed, and the deadly November 2018 drop occurred that took Bitcoin price to its bottom around $3,200.
Is this latest bullish engulfing candle in Bitcoin yet another fake-out that leads to further downside and a continuation of the downtrend? Only time will tell, but for now, the bullish momentum will continue as crypto traders anticipate a reversal with the halving.