The daily timeframe readings are bearish, but shorter-term wave analysis suggests that the price of BTC is about to bottom, and may have already bottomed.
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Bitcoin has pulled back from resistance
According to technical analysis of the daily chart, the picture on BTC is colored in bearish tones. On July 13, bitcoin hit a new yearly high of $31,800, but then quickly declined.
The next day, a bearish engulfing candlestick pattern formed on the chart. This pattern is characterized by a large bearish candle (red circle) that completely engulfs the previous day’s bullish candle. These patterns often signal a possible decline.
After the bearish candlestick pattern appeared, the BTC exchange rate held above the horizontal level of $30,000 for some time. However, it ended up making a decisive bearish breakout on July 23rd. This breakout turned the entire previous bullish breakout into a price deviation that is often followed by a subsequent sharp decline.
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Source: TradingView
The daily relative strength index (RSI) is giving clear bearish signals. This momentum indicator RSI is currently in a downtrend and is holding below the 50 level, which is a sign of a bearish trend.
In addition, as price declined, the RSI confirmed the triple bearish divergence that has been forming since June 23 (green line). Bearish divergence occurs when the price is rising but the momentum indicator is declining. This indicates that the strength of the upward movement is fading away. This pattern is often a harbinger of a bearish trend reversal.
BTC outlook: wave analysis promises an imminent bottom
Meanwhile, wave analysis of the shorter 6-hour timeframe indicates that bitcoin is correcting, but this correction is already nearing completion.
BTC has supposedly been forming a five-wave bullish structure since June 14. If this wave analysis is correct, it means that the price triggered a correction next, probably following the W-X-Y pattern.
On July 24, the price bounced off the 0.382 Fibonacci retracement level (green icon). Fibonacci levels are traditionally considered the most likely springboards for stopping and reversing price after a significant advance in any one direction. Thus, they can determine the limits of the price move.
More importantly, the bounce coincided with the channel support line. This makes it even more likely that the movement inside the channel was corrective. However, a bullish breakout from the channel is needed to confirm the completion of the correction.
In this case, BTC is likely to break through the channel resistance line and rise to a yearly high of $31,800, a rise of 8% from the current price.
Source: TradingView
Despite this optimistic outlook, a BTC drawdown below the July 24 low of $28 842 would indicate that the correction is not yet complete. In this case, a new decline to the channel support line is likely.
This support line is currently located at the level of $28,000. A decisive close below the 0.618 Fibonacci retracement level of the $27,300 retracement would indicate that price has reached a local top. In such a scenario, the price of BTC could drop to $25,000.