Bitcoin (BTC) is still completing a corrective phase. Whether it bounces at the support line of the current pattern or breaks down from it will likely determine the direction of the trend
BTC has been trading inside an ascending parallel channel since reaching a local low on Dec 4. The movement inside the channel led to a high of $52,088 on Dec 27.
However, it failed to continue moving higher and has been decreasing since. The high served to validate both the $51,600 resistance area and the midline of the channel as resistance.
Currently, BTC is trading at the support line of the channel and could potentially rebound.
The hourly chart shows that BTC has fallen below the $48,050 support area. This is both the 0.618 Fib retracement support level and a horizontal resistance area. It possibly validated this level as resistance on Dec 29 (red icon).
Despite the drop, there is also a strong support level at $46,950. It’s created by the 0.786 Fib retracement support level and a horizontal support area.
If the upward movement is to continue, BTC has to create a higher low at this level.
There are two potential wave counts at play. While both suggest that BTC will eventually reach $55,000-$58,000, the short-term movement differs between the two.
The first count suggests that BTC will drop towards its Dec 4 lows, completing the X wave of a W-X-Y corrective structure. After this, it could increase towards $55,500-$58,700, the 0.5-0.618 Fib retracement resistance levels.
The second count suggests that the drop is complete, and the price will head directly towards the outlined resistance area.
Whether BTC breaks down from the support line of the channel or bounces will likely determine which count will transpire.