Bitcoin (BTC) is likely in the middle of a short-term correction that has taken it below $60,000. Following this correction, a rebound in price is likely.
BTC decreased considerably on Oct 26 and created a bearish engulfing candlestick. This is a type of bearish candlestick in which the entire upward movement from the previous day is negated with an equal or larger drop the next day.
The main support area is found between $52,400 and $53,350. This range is made up of a short (white) and a long-term (black) Fib retracement level and a horizontal support area. There is also a minor support level at $56,550, created by only the short-term Fib level.
Technical indicators support the continuation of the decrease.
The MACD, which is created by short and long-term moving averages (MA) is falling. Currently, the MACD is still positive, indicating that the short-term trend is moving faster than the long-term trend. However, it’s decreasing, signaling that the MA is decelerating.
The RSI, which is a momentum indicator is also decreasing. It’s above 50, signaling that momentum is still bullish, but the decreasing RSI indicates that momentum is also losing strength.
BTC gets rejected
The six-hour chart shows that BTC is moving underneath a descending resistance line since the Oct 20 all-time high price.
More recently, the line rejected the price on Oct 25 (red icon), initiating the current downward move. The rejection also coincided with the $63,650 resistance area.
As long as the descending line remains unbroken, the short-term trend is considered bearish.
The short-term wave count shows that BTC is likely in an A-B-C correction, which is potentially contained inside a parallel channel. For a long-term wave count analysis, click here.
Currently, BTC is in the C wave, which is the final portion of the correction and after which a rebound in price is likely.
There is considerable support near $56,500 and a drop to those levels would give waves A:C an exact 1:1 ratio. Furthermore, it would coincide with the support line of the channel. In addition to this, the area coincides with the short-term Fib support outlined in the first section.