Bitcoin (BTC) bounces back after breaking $25,000 short
Bitcoin (BTC) is showing bullish reversal signs in the weekly timeframe, but is still trading within a corrective short-term pattern.
BTC has been falling since hitting an all-time high of $69,000 in November. The downward movement led to a low of $17,622 in June. Since then, Bitcoin has moved upward, reaching a peak of $25,211 on August 15.
The low served to validate the $19,300 horizontal area as support.
An interesting development is happening in the weekly RSI, which has now moved out of its oversold territory (green icon). Also, it appears to be breaking out from a descending resistance line (solid) that has been in place since Nov.
There is another descending resistance line (dashed), which has been in place since early 2021. An RSI breakout above it and recovery of the 50 line will confirm that a bullish reversal has begun.
BTC breaks out
The daily chart shows that BTC has broken out of a descending resistance line (dashed) that had been in place since April. Breaks from such long-term structures usually indicate that a long-term upward movement has begun.
However, Bitcoin has failed to initiate a significant upward move and has yet to reach the 0.382 Fib retracement resistance level at $29,370.
Despite this, the possibility of a bullish structure remains intact, as the daily RSI is following a rising support line (green) and so is the price (black). The bullish structure remains intact as long as the line is in place.
However, the six-hour chart shows that BTC has been rising in an ascending parallel channel since June 18. So far, it has made three failed attempts to break out (red icons), most recently on August 15.
Parallel channels usually contain corrective movements, which means that an eventual breakdown can be expected.
Therefore, whether BTC breaks out of this channel or falls below the midline is likely to determine the direction of the future trend.
Wavenumber analysis
The main wave count indicates that BTC is likely in wave three of a five-wave uptrend (black). The sub-wave count is shown in yellow, and also suggests that the price is in wave three.
So this appears to be a 1-2/1-2 wave formation. If correct, it would mean that the recovery will accelerate in the near future.
For the count to remain correct, Bitcoin must stay above the slope of the original 1-2 and break out from its ascending resistance line (black).
The alternative short-term count suggests that the entire upward movement since June 18 is part of a leading diagonal, hence the shape of the rising wedge. In this case, a decline towards the 0.5-0.618 Fib retracement support levels of $20,500 to $21,400 would be expected before the continuation of the upward movement.
In any case, both short-term counts and most likely long-term wave counts indicate that the bottom is in.
For Be[in]Crypto’s previous Bitcoin (BTC) analysis, click here
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