Bitcoin is slowly but surely getting back on its feet, with the price somewhat stabilizing at around $56,000. Unfortunately, the purchasing power is lacking, and the market clearly needs another boost. The so-called “bullish megaphone” pattern could be the answer.
A sign of potential for a significant surge in technical analysis is often seen in the bullish megaphone. Also known by another name, this pattern consists of two diverging trend lines, one sloping down and one sloping up, giving the chart the appearance of a megaphone.
Price movements expand between the two trend lines, demonstrating the increasing degree of volatility that is characteristic of this pattern. It usually develops after a phase of sideways or consolidation trading, indicating that the asset is preparing to break out. Here is how it works:
Formation: As prices fluctuate between higher highs and lower lows, a pattern begins to form. The megaphone shape is formed by price swings that become larger than previous ones.
Increasing Volatility: Volatility increases as the pattern develops. As price action increases in scale, the market often becomes confusing and uncertain. One important aspect of the bullish megaphone pattern is its increased volatility.
Breakout: The final breakout of this pattern is its defining characteristic. This breakout usually occurs through the upper trendline for a bullish megaphone. A breakout that is supported by higher buying interest and trading volume indicates strong upward momentum.
Target Price: After a breakout, the target price is usually determined by measuring the height of the pattern at its widest point. The possible upside is then calculated by adding this measurement to the breakout point.
