Bitcoin (BTC) bounced off minor support and appears to be gearing up for a move above a descending resistance line.
Bitcoin broke above this descending resistance line on July 12 and validated it as support two days later (green arrow). After a weak rebound, the price created a slightly lower trough pattern on January 14th.
It then bounced back again, creating another long bottom strand. This is often seen as a sign of buying pressure.
The nearest resistance is found at $45,850. This is the 0.5 Fibonacci retracement resistance zone as well as a horizontal resistance zone.
Short Term Bitcoin Movement
The 2-hour chart is showing bullish signs, but not enough to confirm a reversal to the upside.
First BTC bounced off the 0.618 Fibonacci retracement support level located at $41,538. This is a common level for the end of a correction cycle.
Next, the MACD is poised to create successive upper momentum bars, although the second bar is not yet closed. The MACD is created by short-term and long-term moving averages (MAs), and the higher momentum bars suggest that the short-term MA is gaining momentum relative to the long-term one. This usually takes place at the start of uptrends.
A break in Bitcoin’s price above the short-term falling resistance line (dotted) would be needed to confirm a short-term reversal.
Price Wave Count Analysis
The long-term wave count suggests that BTC is currently in wave four of a five-wave upward move, which started in December 2018.
Wave two took 259 days to develop (in dark gray) while so far wave four took 329 days. That said, the near-term count for wave four remains uncertain.
The most bearish wave count suggests that BTC is in an extended flat correction. This means that wave C is 1.61 times longer than wave A. In this case, this would indicate that the correction will continue and the price of Bitcoin will fall to $21,000.
The second possibility suggests that BTC has completed, or is very close to, a steady flat correction. This is a type of correction in which waves A and C have a ratio of 1:1.
Knowing that the long-term wave four that was previously mentioned is already longer than wave two, this would seem logical as a finalized pattern.
In the least plausible scenario, Bitcoin’s price would trade within what is known as the Fourth Wave Triangle. In this case, the pattern would take several more months before initiating a rebound between support and resistance.
Knowing that this would cause a very significant difference in duration compared to wave two, this option seems unlikely.
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