May 11 bitcoin made a bearish breakout. Although the decline was halted and BTC rebounded, it was never able to recover above the breakout level
If bitcoin (BTC) fails to recover anytime soon, the price decline could continue.
Has the correction begun?
As the results of technical analysis of the daily chart show, the bitcoin picture looks pessimistic because of the formation and subsequent breakthrough of the pattern “head-and-shoulders”, which is considered bearish.
After the formation of the second arm of this pattern there is usually a fall and a break of the neckline, which was exactly what we saw in BTC on May 11.
On May 15, the price rebounded by testing the neckline as a resistance (red sign), and in the next 24 hours it rolled back again.. Such a pattern bodes well for further declines in the market.
The daily Relative Strength Index (RSI) also confirms the potential for continued price declines.
It is a momentum indicator indicating overbought/oversold and bullish/bearish market sentiment, depending on whether it is above or below the 50 mark.
In the case of BTC, it is holding below 50, which is a sign of a bearish trend.
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BTC: what does wave analysis say
Wave analysis suggests two variants of further developments. According to the bearish scenario, bitcoin completed a five-wave bullish price structure (black).
If true, then the market is now in a corrective A-B-C phase (white).
If a potential bearish breakout passes a distance equal to the full height of the pattern (indicated in white), it could cause a $23,400 low for BTC.
There is also a 0.5 Fibo retracement level (indicated in 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 a price move.
This increases bitcoin’s chances of forming a bottom here. Respectively, this increases bitcoin’s chances that the market can form a bottom here.
In a bullish scenario, BTC is now in wave 4 of a five-wave bullish structure. This bodes well for the price to move up towards the $33,000 average.
This contradicts the “head-and-shoulders” pattern, but it connects well with the channel connecting the maximums of waves 1 and 3.
In this case, we can expect a continuation of the bull run not only of bitcoin, but of the entire crypto market.
The absorption of the high at $25 270 (red line) will confirm that BTC plays out a bearish scenario. This is because, according to Elliott wave theory, wave 4 cannot enter the territory of wave 1 (red line).
It would also cause a bearish breakout of the potential channel. Thus, if this happens, the forecast for the price of BTC assumes a fall to $23 200.