Although Bitcoin (BTC) price action is firmly bearish, technical indicators are suggesting that a significant recovery could occur soon.
Bitcoin had risen above an ascending support line since Jan. 22. The line was confirmed multiple times and subsequent bounces created multiple long lower wicks and bullish candlesticks (green symbols).
While the exact slope of the line cannot be pinpointed due to the presence of these wicks, it appears that BTC finally broke off the line on April 22nd.
While it initially created a bullish candlestick on April 26th, gains were completely wiped out (highlighted) by a bearish engulfing candlestick the next day. This also served to confirm the previous ascending support line as resistance (red icon).
This is a downward trend that could result in lower prices.
Bullish divergences are piling up
Despite the bearish price action, technical indicators are showing several bullish signs. This is illustrated by the bullish divergences that have been developing on the RSI and MACD histogram.
The RSI divergence is particularly notable as similar readings have previously resulted in significant bullish moves and are looming on the daily timeframe.
The six-hour chart also supports the possibility of a sizeable rally in price. Similar to the daily timeframe, both the RSI and MACD have generated bullish divergences (green lines).
If these are a catalyst for BTC price to rise, the next area of resistance would be $43,000. This target is both the 0.5 Fib retracement resistance level and a horizontal resistance area.
Short term BTC movement
The two-hour chart shows a horizontal resistance area at $38,650. This is a level that previously acted as support prior to the April 27 collapse.
Currently, BTC is in the process of moving beyond this area. If successful, BTC is likely to continue rising towards the previously outlined resistance area near $43,000.
If that fails, BTC could continue to gradually decline towards $37,000 and confirm the support line of an ascending parallel channel that has existed since February 24 before breaking out.
In any case, it seems that a bottom is about to be reached.
For BeInCrypto’s previous Bitcoin (BTC) analysis: Click here.
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