The candlestick pattern shows sellers are looking to reassert themselves as hawkish Fed rate projections drive the DXY higher.
Updated Jan 3, 2025, 3: 36 p.m. UTCPublished Jan 3, 2025, 7: 12 a.m. UTC
Bitcoin (BTC) started the new year on a high note after tapping into the six-figure mark in 2024. Most observers expect 2025 to be just as remarkable, with projections placing BTC at $185,000 and higher.
The road, however, may not be as straightforwardly bullish as expected, as the recent price action suggests sellers are looking to reassert themselves, raising the possibility of a notable price drop ahead.
We are referring to the price action of December, when bitcoin reached a record high above $108,000 but ended the month negatively, below $94,000, registering its first monthly loss since August.
The two-way price action formed a bearish reversal candlestick pattern called the “shooting star” on the monthly chart.
The candle features a long upper wick or shadow, reflecting a substantial gap between the high and the open for the given period, paired with a small body, representing a minimal difference between the open and close. The wick needs to be at least twice the size of the body, and the lower wick could be minuscule at best. In BTC’s case, the upper wick is nearly four times bigger than the body, with a tiny lower wick.
The shape of the shooting star shows that buyers initially drove prices higher, only for sellers to take control near highs and push prices below the opening level, hinting at a renewed bearishness in the market.
“The bears are potentially in control,” explains the CMT Association’s Level III textbook, shedding light on the psychology behind the shooting star pattern.
The shooting star has appeared after a notable uptrend from $70,000 to over $100,000, warning of a potential bearish reversal ahead, which would be confirmed if prices dip below the December low of $91,186. That’s the level to defend for the bulls.
Note that similar candles with longer upper wicks have marked previous bull market tops.
Short-term pain
The cautious message of