While bitcoin (BTC) has been increasing since May 12, it is not yet clear if the increase is a bullish trend reversal or a corrective bounce.
Bitcoin has been decreasing underneath a descending resistance line since April 5. The line rejected the price on May 5, eventually leading to the May 12 low.
The price has been moving upwards since, trading inside an ascending parallel channel.
Yesterday it reached a confluence of resistance levels at $31,500, created by:
- The $31,500 resistance area
- The descending resistance line
- The middle of the parallel channel
Whether BTC breaks out or gets rejected could very well determine the direction of the future trend.
Short-term BTC movement
A closer look at the daily movement continues to show conflicting signs.
On the bullish side, bitcoin created a long lower wick on June 7 (black icon), validating the support line of the channel. Additionally, the RSI has generated considerable bullish divergence.
On the bearish side, the divergence trendline is very close to breaking down and the RSI has been rejected twice by the 50 line.
The two-hour chart shows a descending parallel channel and an RSI that has been freely moving above and below 50.
So it does nothing to help determine the direction of the future trend.
Wave count analysis
There are two main potential wave counts in play.
The first suggests that the price is completing a five-wave downward movement since April. It has just completed wave four and will soon drop to finish wave five.
The second suggests that wave five is truncated instead, and bitcoin is completing an upwards correction.
Whether the price manages to break out from the $31,500 area or gets rejected will likely determine which of the counts is true.