Although price momentum and RSI signals are bearish, wave analysis suggests that BTC may bottom soon. However, a decisive price rebound is needed for this opportunity to persist.
A decisive price rebound is needed.
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Bitcoin has pulled back from resistance
According to the results of the technical analysis of the daily chart, the bitcoin picture looks bearish. On July 13, the price of BTC reached a new yearly high of $31,800, but then quickly declined. The next day, a bearish engulfing candle (red icon) was formed, which is characterized by a large bearish candle that completely engulfs the previous day’s bullish candle. This pattern often leads to a subsequent decline in price.
After the appearance of this bearish candlestick pattern, BTC hovered above the $30,000 horizontal area. On July 23, however, he made a decisive breakthrough of that zone as well. Thus, the entire previous bullish breakout is seen as a price deviation, often followed by a sharp decline.
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Source: TradingView
The daily relative strength index (RSI) is showing a decidedly bearish bias. This momentum indicator is currently declining and is below the 50 mark, which is a sign of a bearish trend.
In addition, with the decline, the RSI confirmed the triple bearish divergence that has been developing since June 23 (represented by the green line on the chart). A bearish divergence occurs when the price is rising, but the momentum indicator is declining, indicating that the strength of the bullish momentum is waning. This pattern often precedes a bearish trend reversal.
BTC forecast: the bottom is near
Meanwhile, the wave analysis of the shorter 6-hour timeframe suggests that price is now correcting, but the bottom is close at hand. According to its results, BTC has been forming a five-wave bullish structure (white) since June 14. If this is indeed the case, then price has further started a correction, probably following the A-B-C pattern (black color). Currently, the BTC price is trading just above the Fibo 0.382 retracement support level (white color).
BTC price is currently trading just above the 0.382 Fibonacci retracement level (white).
Fibonacci levels are traditionally considered the most likely springboards for price to stop and reverse after a significant advance in any one direction. They can determine the limits of market moves. Thus, the price has already reached the level where the correction could potentially end.
Wave A:C ratio is exactly 1:1.61. Due to this confluence of support levels, the correction may have already been completed. If so, BTC should recover above the $30,000 level and possibly head towards $32,000.
Otherwise, the next important support will be at the $28 100 level (Fibo 0.5 retracement level). Once the correction is complete, a significant price increase can be expected.
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Source: TradingView
Despite the bullish outlook, a decisive close of BTC below the Fibo 0.618 retracement support at $27,300 would indicate that the price has reached a local top instead of a bottom. In that case, bitcoin could fall as low as $25,000.