Bitcoin (BTC) plummeted on Feb. 2 after being rejected by a descending resistance line. Although it has recovered from the short-term support, the price action suggests that the price is likely to drop further in the short-term before reversing.

Day view

Bitcoin has been moving along a descending resistance line since hitting an all-time high of $69,000 on Nov. 10 the next day. While this move adds to the importance of this line, it is worth noting that resistance levels are weakening each time they are touched, so an eventual break above it would be the most likely scenario.

If there is a breakout, the first area of ​​resistance will be found at $40,800. This target is a horizontal zone that previously acted as a support. Above that, the next resistance will be found at $46,700, the 0.382 Fibonacci retracement resistance.

BTC/USDT daily chart | Source: TradingView

Brief incident

The two-hour chart shows two main developments.

First, Bitcoin deviated above the Jan. 26 high (red line) before falling back below it. This is a bearish trend that is usually followed by a move down.

Second, it broke below an ascending support line that has been forming since January 27th. This further supports the possibility of further near-term declines.

BTC/USDT 2 hour chart | Source: TradingView

The bulls have started to jump in at the $36.630 minor support created by the 0.382 Fib retracement support. The key horizontal support comes in at $35.925 created by the 0.5 Fib retracement level.

BTC/USDT 2 hour chart | Source: TradingView

Count waves

The most likely number of long-term waves indicates that a bottom has been reached. As for the short-term wave count, it is possible that BTC is about to complete a shallow ABC correction.

With partial waves A and C (black) in a 1:1 ratio, Bitcoin will reach a low of $35,871, coinciding with the support area outlined above.

BTC/USDT 2 hour chart | Source: TradingView

Although Bitcoin could technically form a first crossover wave, the strong pullback on Feb. 2 has turned that possibility less positive.

BTC/USDT 2 hour 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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