The fall in the crypto market continues. BTC formed a 3+% bearish candlestick this week and reached long-term support around $25,100
This level is crucial to maintaining the integrity of the uptrend of the past six months. If bitcoin (BTC) takes advantage of existing support zones and breaks out of the bullish pattern of the descending parallel channel, the uptrend could get a continuation.
If bitcoin (BTC) takes advantage of existing support zones and breaks out of the bullish pattern of the descending parallel channel, the uptrend could get a continuation.
Bitcoin is trying to maintain its uptrend
As the results of technical analysis show, bitcoin fell more than 3% yesterday and closed at an important support level of $25,100 (green area). It coincides with the Fibo level of 0.382 correction of the entire upward movement since January 2023. This Fibo level is the most frequent target for a healthy correction within a strong uptrend or downtrend.
BTC continued to decline, however, losing this support.
BTC, however, continued to decline, losing this support. If today’s move does not turn out to be just an aberration, then the continued decline may not be a correction. In that case, it could lead to the end of the uptrend that has been developing since early 2023.
However, if bitcoin can quickly recover above the $25,100 level, that would be a bullish signal and the uptrend would continue. In this case, a bounce to at least $27,400 is possible.. This is both the Fibo correction level of 0.236 and the upper boundary of the descending parallel channel, in which BTC has been trading since mid-April.
Source: TradingView
In addition, yesterday’s decline resulted in the loss of the median of this channel (blue dotted line). In such a situation, the natural target is the lower boundary of the channel, which is currently declining, passing around $23,700.. There is also the Fibo level of 0.5 and the 200-day moving average (200D MA, blue).
If this level is broken, the next important support will come into play at $21,450. This is the Fibo level of 0.618 and an important horizontal resistance/support area.
Trading volume signals the end of the contraction phase
It is worth noting that bitcoin trading volume has been declining consistently since November 2022, following the collapse of FTX. A drop in trading volume signals a decline in the volatility of the asset and indicates a prolonged contraction phase.
This period is usually followed by a surge in trading volume and a strong move up or down.. The current pattern already looks very mature and indicates that the price is ready to move in the coming weeks (blue circle).
Long-term RSI could be supportive
Daily technical indicators are showing bearish signals. The Relative Strength Index is below the 50 mark and falling.
Using RSI as a momentum indicator, traders can determine if the market is overbought or oversold. In addition, with this indicator, they decide whether to accumulate or sell assets. If the RSI exceeds 50 and the trend is upward, the bulls have an advantage. The opposite is true when the RSI is below 50.
The longer-term RSI chart, however, appears to follow an upward support line plotted from June 2022 levels (black). Its last three touches (blue circles) marked lows in the BTC market (blue arrows) and were signals to buy.
This line is currently just above the oversold level, around 30. RSI must fall another 5 points to reach this value. The indicator histogram forms longer and longer red candles, confirming the downtrend (orange circle). If there is a potential bounce, one of the first signals will be a shorter, pale red MACD bar.
YouTube feed
.
BTC forecast: will bullish divergence lead to a rebound
The short-term 4-hour chart gives a slightly more bullish outlook for the price of BTC. First of all, here bitcoin is in a repeatedly confirmed pattern of a descending parallel channel. This pattern is bullish and in most cases leads to a breakout of its upper boundary.
To make this possible, however, the price of BTC must reach again the median of the channel at $25,450 and the horizontal support area S1. Only after that the bulls can try to recover above the weekly pivot level (P) at $26,200 and possibly move to the upper boundary of the channel.
Source: TradingView
In addition, we see a bullish divergence (green) developing on the 4-hour RSI. BTC formed a declining low, and RSI is in the process of forming an as yet unconfirmed rising low. If the divergence is confirmed, it will be possible to try to restore the lost support levels.
More importantly, the MACD also seems to be trying to reverse the short-term trend. The histogram formed its first pale red bar and is trying to reverse upwards.
If these attempts fail, the nearest support area remains at the S3 level, near $24,000. It coincides with the lower boundary of the descending parallel channel.