Bitcoin (BTC) Reclaims Dec 4 Lows and Approaches Descending Channel Resistance

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In Brief
  • Bitcoin is trading inside a descending parallel channel.

  • BTC is facing resistance at $45,900.

  • It has likely completed or is nearing the completion of a five-wave downward movement.

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Bitcoin (BTC) has nearly reached the resistance line of its short-term pattern. Whether it breaks out or gets rejected will likely determine the direction of the short-term trend.

Bitcoin has been falling inside a descending parallel channel since Dec 27. This led to a low of $39,650 on Jan 10. BTC bounced after reaching the support line of the channel and has been moving upwards since.

The ongoing upward move has caused BTC to reclaim the Dec 4 low (red line), below which the price had seemingly broken down. 

Currently, the price is very close to the resistance line of the channel. A breakout above it could cause it to spike toward $45,900, the 0.5 Fib retracement resistance level, and a horizontal resistance area.

Potential breakout

Technical indicators support the possibility of a breakout since the MACD and RSI are both increasing.

The MACD is created by short and long-term moving averages (MA) and is nearly positive. This would mean that the short-term MA is moving faster than the long-term average, and is normally a sign of bullish trends. 

The RSI has moved above 30 and is close to moving above 50, which is often considered the threshold for a bullish trend.

Bitcoin wave count analysis

While the long-term wave count is still undetermined, the shorter-term count indicates that BTC has completed a five-wave downward movement (black). 

However, wave five has been relatively short. It failed to reach the $36,100-$36,500 target range given by the 1:1 ratio of waves one and five (black) and the 1.61 external Fib retracement level of wave four (white).

The sub-wave count is shown in red.

An even closer look shows that sub-wave five has also been small relative to sub-wave one and three. It’s less than 0.618 the length of sub-wave one. So, it’s possible that BTC is still in sub-wave four and that the downward movement will extend by one more drop toward the previously outlined target.

In case the movement extends, giving sub-waves 1 and 5 a 1:1 ratio, BTC could reach a low of $36,900. This would fit better with the longer-term target. 

Whether BTC breaks out above the resistance line of the channel or gets rejected will likely determine which wave count will play out.

In any case, it seems that BTC is very close to reaching a bottom.

For BeInCrypto’s previous Bitcoin (BTC) analysis, click here.

Disclaimer

All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.
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Valdrin discovered cryptocurrencies while he was getting his MSc in Financial Markets from the Barcelona graduate school of Economics. Shortly after graduating, he began writing for several different cryptocurrency related websites as a freelancer before eventually taking on the role of BeInCrypto's Senior Analyst.

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