Bitcoin (BTC) has been showing bullish signs since March 11. It’s currently nearing the end of a descending wedge pattern that’s been in place since March 18.
Bitcoin has been falling since reaching a local high of $48,189 on March 28. The downward move was initially swift, but has slowed down a bit since March 11. During this time, the RSI generated a considerable bullish divergence (green line). Such divergences often precede upward movements.
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As for the price action, BTC is trading just above the $38,000 horizontal support area, which has been in place since the beginning of March. A breakdown below this level would be an extremely bearish development that could lead to lower prices.
Short-term BTC movement
A look at the six-hour chart supports the possibility of a breakout for two main reasons.
BTC has been trading inside a descending wedge since April 18. The wedge is often considered to be a bullish pattern, meaning that it leads to breakouts the majority of the time.
Secondly, similar to the daily time frame, the RSI and MACD have both generated bullish divergences.
If a breakout occurs, the main resistance area would be found at $43,000. This target is the 0.5 Fib retracement resistance level and a horizontal resistance area.
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Wave count analysis
The most likely wave count indicates that BTC is nearing the end of an A-B-C corrective structure (red), which has been in place since Feb. 10.
If a bottom is reached near the current level, it would give waves A and C an exact 1:1 ratio, which is common in such structures.
The sub-wave count is shown in yellow in the chart below and suggests that BTC is in the fifth and final sub-wave, which has taken the shape of an ending diagonal.
Therefore, the wave count is in alignment with the daily and six hour time frame readings, and suggests that a breakout is likely.
For BeInCrypto’s previous Bitcoin (BTC) analysis, click here
