Bitcoin (BTC) has risen from minor support and appears to be preparing for a breakout of the short-term descending resistance line.
Bitcoin broke the descending resistance line on Jan. 12 and confirmed it as support (green icon) two days later. After a weak bounce, it hit a slightly lower low on January 14th.
After that, the price rebounded, creating another long lower wick. This is often taken as a sign of buying pressure.
The next resistance is found at $45,850. This is the 0.5 Fib retracement resistance and horizontal resistance area.
Bitcoin/USDT 6 hour chart | Source: TradingView
The 2-hour chart is showing some bullish signs, but not enough to confirm a bullish reversal.
First, Bitcoin rallied to the 0.618 Fib retracement support at $41,538. This is the level that usually ends correction periods.
Second, the MACD is in the process of forming successively higher momentum bars even though the second bar has not yet closed. The MACD generated by the short-term and long-term moving averages (MAs) and higher momentum bars shows that the short-term MA is slightly increasing compared to the long-term MA. This usually happens in the early stages of an uptrend.
A break above the short-term descending resistance line (dashed) is needed to confirm a short-term reversal.
BTC/USDT 2 hour chart | Source: TradingView
The second wave took 259 days (marked) to develop, while the fourth wave has taken 329 days so far. However, the number of short-term waves of wave 4 is still unclear.
BTC/USDT weekly chart | Source: TradingView
The most likely downside shows that BTC is in an extended flat correction. This means that wave C is 1.61 times longer than wave A. If true, it means that the correction continues and BTC could drop to $21,000.
BTC/USDT 3-day chart | Source: TradingView
The second possibility suggests that BTC has completed or is about to complete a regular flat correction. This is a type of correction where waves A and C have a 1:1 ratio.
Given that the long-term wave 4 outlined above is already longer than wave 2, this is possibly the most promising scenario.
BTC/USDT 3-day chart | Source: TradingView
Least likely is BTC trading in a triangle containing wave 4. If true, it will take several months to complete the pattern of multiple bounces of support and resistance.
Since this would mean a huge time difference to wave 2, this seems unlikely.
BTC/USDT 3-day chart | Source: TradingView
Disclaimer: This article is for informational purposes only, not investment advice. Investors should research carefully before making a decision. We are not responsible for your investment decisions.
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