The Basic Attention Token (BAT) price has broken down from a horizontal support level but is trading inside a bullish reversal pattern.
Whether the price breaks out or down from this pattern will be crucial in determining its future trend.
BAT Approaches Support
BAT has been decreasing since Aug 21 when it reached a high of $0.443. The decrease has been swift, and while the price initially bounced at the 0.618 Fib level of $0.217, it has fallen below since. The $0.217 level is now expected to act as resistance.
The next closest major support level is found at $0.156, the 0.786 Fib level of the entire upward move beginning in March. At the time of press, the price was trading between these two levels at $0.184
Despite the lack of horizontal support, BAT is trading at the support line of a descending wedge, which is normally considered a bullish reversal pattern.
Indicators Show Weakness
Even though BAT is trading inside a bullish pattern, technical indicators in the daily time-frame do not provide any bullish signs. The MACD and RSI are decreasing, and the latter has been rejected by the 50-line.
If the Stochastic oscillator makes a bearish cross and the MACD crosses into negative territory, it would likely confirm that the trend is bearish.
Cryptocurrency trader @Mesawine1 outlined a BAT chart, which shows that the price has just completed a bearish impulse and could soon break out from the current descending wedge.
Since the aforementioned Aug 11 high, it seems that the price has completed or is nearing the end of a bearish impulse (shown in black below). While wave 3 was extended, the fifth wave is possibly transpiring inside an ending diagonal, hence the wedge shape and the overlap between sub-waves (blue).
If the price breaks out from the wedge, it would be expected to increase towards $0.316-$0.346, the 0.5-0.618 Fib levels of the entire previous decrease.
A closer look at the wedge reveals that sub-wave 3 has been shorter than sub-wave 1. Since Elliott Wave Theory rules dictate that wave 3 cannot be the shortest out of waves 1-3-5, a sustained drop below $0.18 (length of sub-wave 3 projected to the top of sub-wave 4) would invalidate this formation.
If it does end up breaking down from this pattern, the $0.156 level is expected to act as support.
To conclude, the BAT price is close to breaking down from a descending wedge, after falling from a horizontal support level. Whether the price breaks out or down from the current pattern will be crucial in determining the future trend.
Disclaimer: Cryptocurrency trading carries a high level of risk and may not be suitable for all investors. The views expressed in this article do not reflect those of BeInCrypto.