Bitcoin (BTC) is in the process of breaking out from a descending wedge pattern, which has been in place since April 18. This could be the catalyst for a significant upward movement.
Bitcoin has been decreasing since reaching a local high of $48,189 on March 28. In the period since March 11, the downward movement became very gradual and choppy. Since then, BTC has fallen by less than 3%.
During this time, the RSI generated a considerable bullish divergence (green line). Such divergences often precede upward movements.
Additionally, BTC has bounced at the $38,000 horizontal support area. The area has been acting as a strong horizontal support level since the beginning of March.
Today, BTC is in the process of creating a bullish engulfing candlestick. This bullish candlestick pattern would be confirmed with a close above $38,525. The creation of this bullish pattern would align with the bullish divergence that has been developing in the RSI.
BTC attempts breakout
The six-hour time frame shows that BTC has been trading inside a descending wedge since April 18. The wedge is often considered to be a bullish pattern that leads to breakouts the majority of the time.
Furthermore, the pattern has been combined with a bullish divergence in the RSI and MACD, both of which support the possibility of a breakout.
If a breakout occurs, the closest resistance area would be found at $42,800. This target is the 0.5 Fib retracement resistance level and the top of the wedge.
Wave count analysis
The most likely wave count indicates that BTC has been completing an A-B-C correction (red) since Feb. 10. The entire movement has been contained inside an ascending parallel channel. Since the bottom of wave C is higher than that of wave A, it is a running correction.
If BTC has reached a bottom, waves A and C would have an exact 1:1 ratio, which is common in such corrections.
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, hence the shape of the wedge. A breakout from the wedge would confirm that the correction is complete.
If so, the long-term wave count suggests that a significant upward move would be likely to follow.
In line with the Trust Project guidelines, this price analysis article is for informational purposes only and should not be considered financial or investment advice. BeInCrypto is committed to accurate, unbiased reporting, but market conditions are subject to change without notice. Always conduct your own research and consult with a professional before making any financial decisions.