Bitcoin Bollinger Bands Squeeze Setting Up for a Breakout
Bitcoin's (BTC) price may be set up for a significant move as the digital currency remains squeezed in a narrow range. Since the beginning of the month, Bitcoin's Bollinger Bands have started to squeeze the price into a narrow range that calls for a notable move ahead.
Bollinger Bands Squeeze
The Bollinger Bands (BB) squeeze is a key trade signal of the Bollinger Bands indicator, which is usually followed by a strong directional movement in the breakout direction.
The BB squeeze occurs when the Bollinger bands narrow, which happens when volatility falls at lower levels.
As seen on the daily chart, the tightening of the BB bands offers an easy way to visualize Bitcoin's price range. The upper BB resistance and lower BB support levels come at $20,000 and $18,700, respectively.
One of the core principles in technical analysis states that small ranges are always followed by large price breakouts.
In this regard, when the BTC price breaks on either side of the BB bands, we can expect a sustained move.
To avoid false breakouts, we need to wait for the Bollinger Bands bands to diverge, meaning the upper Bollinger Bands must point up while the lower BB must point down.
Looking forward: A break to the upside will open the door for a retest of the September 13 high of $22,800, while a breakout to the downside will challenge the mid-June low of $17,700.
