Why a Morning Star Reversal Could Spark a Monster Bitcoin Rally

Bitcoin price is already drawing attention after claiming $20,000 per coinbut if the current monthly candle closes on the BTCUSD price charts, the top cryptocurrency will meet the conditions of a morning star reversal pattern.

The last time the signal occurred at the bottom of a major downtrend, Bitcoin began a two-year cryptocurrency bull run and surged more than 6,000% after the morning star was confirmed.

Bitcoin Recovers $20,000: A Wake Up Call For The Bull Market

Bitcoin is once again above $20,000, but a lot has changed since 2020 when you first passed the key level. The number one cryptocurrency by market cap has declined by 78%, and altcoins have crashed dramatically by as much as 99%.

But markets are cyclical, and some signs are beginning to point to the end of a bear phase in crypto and the possibility of a new uptrend blossoming. Top analysts are starting to wake up and take note, and now they are calling for a bottom and a cyclical bottom.

Reaching over $21,000 has put BTCUSD above levels prior to the FTX crash of two months earlier. More importantly, the three month period has resulted in a three candlestick reversal pattern called the morning star.

The Morning Star Reversal Pattern is a bullish candlestick reversal pattern that, when confirmed, should result in a three to five month follow-through. A substantial change from bearish to bullish would return Bitcoin to its previous bullish state.

A morning star reversal pattern has formed | BTCUSD on TradingView.com

What a Morning Star Reversal Could Mean for Crypto

According to Investopedia, “a morning star is a visual pattern made up of a tall black candlestick,” a white or black doji, “and a third tall white candlestick.” “The middle morning star candle captures a moment of market indecision as bears begin to give way to bulls. The third candlestick confirms the reversal and may mark a new uptrend,” an excerpt read.

Analysts and traders should look to the technical indicators to confirm the signal. For example, the Fisher Transform is crossing bullish from extreme negative deviations, and could help provide confirmation of an extended uptrend to follow.

Is this confirmation of a new bull trend? | BTCUSD on TradingView.com

Historically, the Fisher transformation combined with a 20% bullish monthly candle was enough to end every bear market in the past. The most direct comparison was in 2015, when another Morning Star reversal pattern helped trigger a new uptrend.

In that case, BTCUSD was up 6,000% in 24 months, after the signal appeared. Confirmation requires this month’s candle to absorb at least 50% of the black down candle from November. The more this month gobbles up the November candle, the stronger the signal. Currently, the entire sail has been engulfed.

Follow, continue @TonySpilotroBTC on Twitter or join the TonyTradesBTC Telegram for exclusive information on the daily market and education on technical analysis. Please note: the content is educational and should not be considered investment advice. Featured image from iStockPhoto, Charts from TradingView.com

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