Declines in the broad cryptocurrency market continue. This week, Bitcoin generated more than a 3% bearish candle and reached long-term support at the $25,100 area.
This level is crucial to maintain the integrity of the uptrend of the last 6 months. If Bitcoin takes advantage of existing support areas and breaks out of the descending parallel channel bullish pattern, the uptrend could continue.
Bitcoin struggles to maintain its uptrend
Yesterday, Bitcoin fell more than 3% and closed at an important support level of $25,100 (green zone). It is confluent with the 0.382 Fib level, measuring all of the upward movement since January 2023. This Fib level is the most common target for healthy corrections in a strong uptrend or downtrend.
However, the current price action continues to decline and BTC is losing this support. If today’s move does not turn out to be just a deviation, the current decline may not be a correction. On the contrary, it could lead to the end of the uptrend, in place since the beginning of 2023.
However, if Bitcoin manages to regain the $25,100 level quickly, it would be a bullish signal and the uptrend would remain intact. A rebound towards at least the $27,400 area would then be possible. This is both the 0.236 Fib retracement level and the upper edge of the descending parallel channel, where BTC price has been trading since mid-April.
Additionally, yesterday’s decline resulted in the loss of the median of this channel (blue dotted line). In such a situation, the natural target is the lower edge of the channel, which is currently descending around $23,700. This level is in strong confluence with the 0.5 Fib retracement and the 200-day moving average (200D MA, blue).
If this level is lost, the next significant support is located at $21,450. This is the 0.618 Fib retracement and an important horizontal resistance/support zone.
Trading volume signals the end of the compression phase
It is worth mentioning that the trading volume of Bitcoin has been steadily declining since November 2022 and the crash of the FTX exchange. Falling volume signals a drop in an asset’s volatility and indicates a prolonged compression phase.
Such a period is usually followed by a sharp increase in trading volume and a sharp rise or fall. The current model already seems very mature and ready to evolve in the coming weeks (blue circle).
Long-term RSI can provide support
The daily technical indicators are giving bearish signals. The relative strength index is below 50 and falling.
By using the RSI as a momentum indicator, traders can determine if the market is overbought or oversold. Moreover, they decide whether to accumulate or sell assets with this metric. If the RSI reading goes above 50 and the trend is up, the bulls have the advantage. The reverse happens when the reading is below 50.
However, the long-term RSI chart appears to be following an ascending support line that dates back to June 2022 (black). Its last 3 touches (blue circles) marked lows in the Bitcoin market (blue arrows) and buying signals.
Currently, the line is just above the oversold territory, near 30. The RSI would have to drop another 5 points to reach this value. So, although the price of BTC still has downside potential, the support on the RSI chart could initiate a rebound and a resumption of the uptrend.
The MACD has also been falling since mid-April. The histogram of the indicator generates longer and longer red candles, confirming the downtrend (orange circle). If a potential bounce were to occur, one of the first signals would be a shorter pale red MACD bar.
BTC Price Prediction: Will Bullish Divergence Lead to a Rebound?
The short-term 4-hour chart provides a slightly more bullish BTC price prediction. First, Bitcoin is in a repeatedly confirmed pattern of a descending parallel channel. This pattern is bullish and in most cases leads to an upside breakout.
However, for this to be possible, BTC price needs to regain the channel median at $25,450 and the S1 horizontal support zone. Only then will it be possible to try to regain the weekly pivot (P) at $26,200 and a possible move to the upper edge of the channel?
Additionally, we see a bullish divergence developing (green) on the 4-hour RSI. BTC price recorded a lower low, while the RSI chart is forming an as yet unconfirmed low. If the divergence is confirmed, it will be possible to try to recover the lost support levels.
Moreover, the MACD also seems to be trying to reverse the trend in the short term. The histogram has generated the first pale red bar and is trying to move up.
However, if these efforts fail, the nearest support zone remains at the S3 level near $24,000. It is at the confluence with the lower edge of the descending parallel channel.
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In accordance with Trust Project guidelines, this price analysis article is provided for informational purposes only and should not be considered financial or investment advice. BeInCrypto is committed to providing accurate and unbiased reports, but market conditions are subject to change without notice. Always do your own research and consult a professional before making financial decisions.