Bitcoin (BTC) fell sharply, forming a bearish candle from last week and making a bearish breakout from a short-term pattern
As thought, bitcoin formed a local top and triggered a significant correction. However, yesterday BTC began to rebound.
Here’s how it could affect the long-term dynamics of the coin.
BTC failed to break key resistance
As the results of technical analysis show, bitcoin declined sharply last week, forming a bearish takeover candle, which completely neutralizes all the growth of the previous candle.
The closing price of such a candle is lower than the opening price of the previous candle in this timeframe.
In addition, the market tested the horizontal area of $31,000 as resistance (red icon).. This is a very important level, as it has previously played a supporting role since early 2021.
This is a very important level, as it has played a supporting role since early 2021.
Respectively, BTC’s inability to take this barrier is a significant sign of weakness.
In the case of its successful breakthrough, this area will again become a support.
However, for the time being, it remains resistance, and the development of a bounce from it will put into play the nearest support around $25,000.
The stock is still in the game.
Despite the price rebound, the Relative Strength Index (RSI) remains bullish as it holds above the 50 mark and rises.
This index is a momentum indicator, indicating an overbought/oversold market, depending on whether it is above or below the 50 mark.
Bitcoin and the correction
The daily chart for BTC is giving two bearish signals. First, the price made a bearish breakout from the rising parallel channel.
This pattern is considered corrective, so its northward direction suggests that the broader trend in the currency is bearish and the price will eventually break south out of this channel.
Second, the daily RSI is signaling a bearish divergence (green line)..
A bearish divergence occurs when the price makes an ascending high and the RSI sets a descending high.
This means that the growth of the price is not supported by the current momentum, and this can lead to its sharp fall.
In this regard, the most probable scenario is a test of the resistance around $29,500, after which BTC can resume its decline.
In this regard, the most likely scenario is to test resistance around $29,500, after which BTC could resume its decline.
The maximum may be formed in the next 24 hours.
In the meantime, the absorption of this year’s high of $31 000 cancels the bearish forecast.
Because such a price move would also mean a breakout of the $31,000 long-term resistance area, it could trigger a violent rally of bitcoin toward the next resistance of $46,000.