Bitcoin Breaks from Pattern but Could Be Nearing a Top

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In Brief
  • Bitcoin has broken out from a parallel ascending channel.

  • There are minor support levels at $13,130 and $12,730.

  • Daily technical indicators are bullish but there is short-term weakness developing.

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On Oct 27, the Bitcoin (BTC) price broke out from an ascending parallel channel and proceeded to reach a high near $13,900.



While the long-term trend remains bullish, BTC is showing considerable short-term weakness.

Bitcoin Breaks Above Channel

Bitcoin had been trading inside a parallel ascending channel since it reached a high of $13,235 on Oct 22. Yesterday, the price broke out and proceeded to reach a high of $13,864.

Since then, the price has decreased and validated the resistance line of the channel and created a long lower wick, a sign of buying pressure.

BTC Chart By TradingView

Despite the breakout, there is a considerable bearish divergence developing in both the six-hour RSI and the MACD.



If BTC drops back, the closest minor support levels are found at $13,130 and $12,730.

BTC Chart By TradingView

Long-Term Movement

The daily chart, however, shows that BTC created a bullish engulfing candlestick yesterday. While the current candlestick is shaping up to be a Doji candle, there are more than 15 hours left until the daily close, so we cannot make any assumptions about its effect on the price movement.

 

Technical indicators do not yet show any weakness. The MACD, RSI, and Stochastic oscillators are increasing and haven’t generated any bearish divergence.

BTC Chart By TradingView

The weekly chart shows that BTC has reached the July 2019 highs, possibly creating a double-top.

If the price were to break out, the next resistance levels would be found near $16,200 and $19,200.

BTC Chart By TradingView

Wave Count

It is likely that BTC began a bullish impulse on Sept 7 (shown in orange below) and is currently near the top of wave 3 or has already completed it. The third wave has extended and the sub-wave formation is shown in blue.

Wave 3 has a preliminary target of $14,360, the 3.61 Fib level of the length of wave 1. Sub-wave 3 (blue) ended at the 3.61 Fib extension of sub-wave 1, so it’s possible the same will happen with wave 3.

However, there is some Fib confluence near $13,950. Combining this with the resistance from the weekly chart, it seems that the price is very close to a top, or has already reached it.

Due to the fact that sub-wave 5 is extremely small, it is more likely that BTC creates one final high before beginning a corrective movement.

BTC Chart By TradingView

It’s worth mentioning that wave 3 has been going on for slightly more than 34 days. If the price has reached a top and begun a correction, we would expect the correction to last for at least 13 days (1.382 Fib time extension).

The most likely level for the correction to end would be near $12,000. This is the 0.5 Fib level of wave 3 and the resistance line of a channel connecting the lows and highs of waves 1-2.

This is conditional on BTC having already reached a high — if not, the 0.5 fib level would be slightly higher.

Invalidation would occur below the wave 1 high at $11,193 (red solid line).

BTC Chart By TradingView

For BeInCrypto’s previous Bitcoin analysis, click here!

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.

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Valdrin is a cryptocurrency enthusiast and financial trader. After obtaining a masters degree in Financial Markets at the Barcelona Graduate School of Economics he began working at the Ministry of Economic Development in his native country of Kosovo. In 2019, he decided to focus full-time on cryptocurrencies and trading.

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