Bitcoin has been decreasing at an accelerated rate since breaking down from an ascending parallel channel on May 5. The downward move has been swift and led to a long-term low of $26,700 on May 12.
The decrease also caused a breakdown of the $30,500 horizontal support area, which had previously been in place since May 2021.
Currently, BTC is making an attempt at reclaiming the level (red icon).
Because the support had been in place for such a long time, whether or not BTC is able to reclaim it could be a major determinant as to the direction of the future trend.
The two-hour chart shows that since the breakdown from the aforementioned long-term channel, BTC has been trading inside a shorter-term descending parallel channel.
On May 12, it bounced at the support line (green icon) of this channel and began to move upward. It seemingly broke out from the channel the next day but is still facing strong resistance at $31,800. This is the 0.382 Fib retracement resistance level and a horizontal resistance area.
The ongoing bounce and breakout are supported by the RSI readings.
Firstly, the indicator broke out from a descending trend line on May 10, and generated a bullish divergence on May 12, coinciding with the rebound at the support line of the channel. Now, the RSI has also moved above 50, which is often considered a sign of a bullish trend.
If BTC manages to reclaim the $31,800 area, it would also reclaim the previously outlined $31,500 long-term support level. As a result, it could help in boosting the price toward the next closest resistance at $34,900.
Wave count analysis
The wave count suggests that BTC has been correcting inside an A-B-C corrective structure (red) since reaching an all-time high price of $69,000 in November 2021.
If true, it’s currently in the C wave.
So far, waves A and C have had a 1:0.61 ratio, which is the second most common in such structures. Therefore, it’s possible that a low has been reached.
The long-term count supports this theory since it suggests that BTC has just completed wave four of a five-wave long-term upward move that began in December 2020.
Yesterday’s low was reached at a confluence of support levels:
A parallel channel created by connecting the highs of waves one and three and projecting them to the bottom of wave two (white).
A parallel channel connecting the highs and lows of waves one and two.
Additionally, if the count is correct, wave four took exactly 1.5 times the length of wave two. In this case, BTC may soon begin a longer-term wave five that could take it to a new all-time high.
Conversely, a decisive breakdown below the $27,000 area would likely mean that BTC will be stuck in a prolonged bear market instead.