Bitcoin (BTC) is in the process of validating previous resistance levels as support, both in the short and medium-term.
BTC had been decreasing underneath a descending resistance line since reaching an all-time high price on Nov 10. The decrease continued until Dec 4, leading to a low of $42,000.
After the low, both the RSI and MACD generated bullish divergences (green lines) for a period of 15 days. This is a bullish development that often precedes bullish trend reversals.
On Dec 21, BTC broke out from the resistance line and is currently in the process of validating it as support (green icon).
The next closest resistance area is found between $55,500-$58,700. This target area is created by the 0.5-0.618 Fib retracement resistance levels.
The two-hour chart shows that BTC broke out from a descending parallel channel that had been in place since Dec 7.
Currently, it’s in the process of validating its resistance line as support (green icon).
The line also coincides with the previous resistance area at $48,100, which is now expected to act as support.
Due to the confluence of horizontal and diagonal levels, the importance of this area is strengthened.
The short-term count suggests that BTC has just completed what is likely a complex corrective structure (highlighted), as noted by the X wave (pink).
If correct, it’s now in the Y wave, which has an upwards direction. If it has a 1:1 ratio relative to wave W, it would lead BTC to a high of $55,400. This would complete a longer-term wave B.
Judging by the length of wave W, which was short, an upward move towards $55,400 would be expected to begin soon.