Bitcoin (BTC) has exhibited bearish momentum over the past few weeks, and now it could make a bearish breakout from a short-term pattern
This breakout has the potential to trigger a sharp drop in BTC to levels it has not visited since early March.
BTC: Resistance gets stronger
As the results of technical analysis show, bitcoin (BTC) has been showing bearish dynamics since early April.
Thus, it formed a bearish takeover candle during the week of April 17-24, and then for two weeks in a row the price showed bounces (red icons).
As a result, the area of $29 800 was confirmed as a strong resistance on the weekly chart. It may have marked a local top.
Despite the bearish price momentum, however, the weekly Relative Strength Index (RSI) remains bullish as it stays above the 50 mark and rises.
This index is a momentum indicator, indicating the overbought/oversold market, depending on whether it is above or below the 50 mark.
In the case of BTC, he suggests that the long-term bullish trend is still in place.
Should we expect a correction?
On the daily chart, the bitcoin picture is painted in bearish tones. This is due to the fact that the timeframe appeared “head-and-shoulders” pattern, which is considered bearish.
After the formation of the second shoulder there is usually a fall of the price and a break of the neckline.
If this prediction materializes and the size of the decline is equal to the height of the whole pattern (white), it can send the BTC price to $23 400 (Fibo 0.5 retracement level, black).
Fibonacci levels are traditionally considered the most probable springboards for stopping and reversing the price after a significant advance in any one direction.
As expected, at these levels, the market can win back some of the distance traveled and only then resume the movement in the original direction.
In addition, they can determine the limits of the price movement.
In the meantime, if the market manages to break above the right shoulder of the $30,000 pattern (red line), it will neutralize the bearish trend and may cause BTC to rise to long-term resistance at $36,500.