2023-4-26 12:30 |
The Bitcoin (BTC) price fell sharply after creating a bearish candlestick last week, breaking down from a short-term pattern in the process.
The Bitcoin price might have reached a local top, meaning that a significant correction is forthcoming. However, the price began a bounce yesterday. How does that fit in the longer-term movement?
BTC Price Fails to Clear Crucial ResistanceThe Bitcoin price decreased sharply last week and created a bearish engulfing candlestick. This is a type of bearish candlestick in which the price negates the entire previous period’s gains. It is confirmed with a close below the opening of the previous period.
Moreover, the candlestick validated the $31,000 horizontal area as resistance (red icon). This is a crucial resistance level since it previously provided support since the beginning of 2021.
As a result, the failure to reclaim it is considered a big sign of weakness. If the price were to break out, the area would be expected to provide support again. However, due to the rejection, the area still acts as resistance. If the drop continues, the closest support area will be at $25,000.
BTC/USD Daily Chart. Source: TradingViewDespite the rejection, the weekly Relative Strength Index (RSI) is still bullish, since it is above 50 and increasing. Traders utilize the RSI as a momentum indicator to assess whether a market is overbought or oversold, and to determine whether to accumulate or sell an asset. If the RSI reading is above 50 and the trend is upward, bulls still have an advantage, but if the reading is below 50, the opposite is true.
Bitcoin Price Prediction: Is This the First Leg of the Correction?The technical analysis from the daily time frame provides a bearish Bitcoin price prediction. There are two main reasons for this.
Firstly, the price broke down from an ascending parallel channel. The ascending parallel channel is a type of corrective pattern in which the price moves inside parallel resistance and support lines before eventually breaking down. Since the channel faces upwards, it means that the dominant trend is downward, hence bearish.
Next, the daily RSI has generated a bearish divergence (green line). This is a type of occurrence in which a similar increase in momentum does not accompany the price increase. Downward movements often follow it, as was the case in BTC.
Due to these readings, the most likely future price scenario is validating the channel as resistance, likely at $29,500, before the downward movement resumes. The high could be reached in the next 24 hours.
BTC/USDT Daily Chart. Source: TradingViewOn the other hand, moving above the yearly high of $31,000 will invalidate this bearish outlook. Since that would also cause a breakout from the long-term $31,000 resistance area, it could cause a quick pump to the next resistance at an average price of $46,000.
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