Bitcoin (BTC) has failed to sustain a minor support area and risks breaking down from its 22-day consolidation pattern.
BTC has been increasing inside an ascending parallel channel since May 12. The upward movement led to a high of $32,399 on May 31. Initially, it seemed that this had caused a breakout from the $31,800 horizontal resistance area. However, the price decreased immediately afterwards, rendering the breakout as only a deviation (red circle).
Additionally, the price fell below the $30,800 area, which was expected to provide support. Now, the area has turned to resistance (red icon).
So, the six-hour chart for BTC provides a mostly bearish outlook, firstly because the price is trading inside an ascending parallel channel. This is usually considered a corrective pattern.
Secondly, the chart looks bearish because the $30,800 area failed to provide support and turned to resistance instead.
The daily chart shows that BTC has been following a descending resistance line (dashed) since March 2020. Similarly, the RSI had been following a descending resistance line during the same period. While the RSI did break out, the price has yet to do so.
Furthermore, the RSI has also generated bullish divergence (green line). But it was rejected by the 50 line (red icon) and has been falling since.
As a result of these conflicting readings, the daily time frame does not help in confidently determining the direction of the trend.
Wave count analysis
Even though the longer-term wave count is bullish, the short-term count is bearish, supporting the interpretation from the channel.
The most likely count suggests that BTC has completed an A-B-C corrective structure, in which waves A:C had a 1:0.618 ratio. The ongoing decrease that validated the support line of the channel support this possibility.
So a breakdown from the channel would confirm that lower prices are on the horizon.
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