Bitcoin (BTC) rose significantly on Wednesday and is showing early signs of a potential bullish trend reversal.
BTC has been declining since reaching a high of $25,211 on August 15th. On 26 August, the downward movement caused it to break through an ascending parallel channel that was present from the 18 June bottom.
After the breakout, bitcoin continued its decline and reached a low of $18,510 on September 7. A low was formed slightly below the $19,000 support area, which was formed from June lows. However, the price bounced back shortly after and reclaimed the area in the process.
chance of bounce
The technical indicator readings support the possibility of a bounce. This is visible in the daily RSI, which has generated a significant amount of bullish divergence. Moreover, it bounced back before reaching the oversold area. Such readings are often preceded by significant price surges.
If it does, the nearest resistance area will lie at $21,100. This is the 0.382 Fibonacci retracement resistance level and coincides with the support line of the previous channel.
BTC wave count analysis
The wave count shows that BTC is in the fifth and final wave of downward movement (white) that started with the price at an all-time high in November.
If true, the downside movement would take bitcoin below its June lows, potentially dropping to $15,420 or $12,770. Targets are found using the 1.27 and 1.61 external Fib retracement levels of wave four (white).
However, the short-term count (red) shows a complete five-wave downside movement. It is not certain whether this was the entire fifth wave from the previous image, in which case it was cropped, or if it was only the first part (black).
In both cases, a significant upward move is likely, whether it is a bounce back from the $21,200 to $21,900 area or if it is a reversal of a new bullish trend.
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