Bitcoin (BTC) has failed to initiate any sort of bounce after breaking down from a corrective pattern. It is now trading inside a short-term bearish pattern.
Bitcoin rebounded slightly during the week of Aug. 28-Sept. 5, but not enough to initiate any sort of trend reversal. Nevertheless, Bitcoin is still trading above the $19,500 horizontal support area. The area had previously acted as resistance during the 2017 all-time high price and then again in December 2020.
The lack of a bounce in price inside this area puts the possibility of a reversal in doubt. While the weekly RSI has seemingly begun to generate a bullish divergence, it is not yet confirmed and could be invalidated by a continued decrease in price.
A weekly close below the $19,500 horizontal area would be expected to force BTC to search out lower supports.
The daily chart shows that Bitcoin has broken down from an ascending parallel channel that had previously been in place since the June lows. The breakdown was also combined with a daily RSI breakdown from an ascending support line (green line).
Now, the RSI is below 50 and Bitcoin is comfortably below the support line of the channel. Both of these are normally considered signs of a bearish trend.
If the downward movement continues, the closest support area in the daily time frame would likely be found at $19,000. This target support level is created by the aforementioned June lows.
A look at the hourly chart supports a drop back to this area. It shows that Bitcoin has been trading inside a symmetrical or descending triangle since Aug. 29.
These triangle patterns are often considered bearish. Because this pattern is unfolding after a downward move, a breakdown from the triangle seems to be the most likely scenario.
BTC wave count analysis
There are two primary potential wave counts at play. The first suggests that BTC has completed wave four of a five-wave downward move, hence the shape of the symmetrical triangle. In it, Bitcoin could decrease further before rebounding.
Because wave three cannot be the shortest, BTC would be expected to fall to the $17,700 region.
The alternative count suggests that Bitcoin is in wave C of an A-B-C corrective structure. Thus, it could rally towards $21,800 before eventually dropping back to the $17,000 zone.
Unless a sharp rebound occurs in the very near future, the first count seems to be much more likely.
For Be[in]Crypto’s previous Bitcoin (BTC) analysis, click here
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