Bitcoin (BTC) rebounded at a minor diagonal support level near $40,000 but could still test the primary support zone between $37,000 and $38,000.
Bitcoin has been declining since March 28 and fell to a local low of $39,200 on April 11.
It’s possible that BTC bounced at an ascending support line (solid) that has been in place since Jan. 22.
However, the technical indicators are bearish. The RSI broke down from an ascending support line and is currently below 50. The RSI is a momentum indicator and readings below 50 are a sign of bearish momentum.
In addition to this, the previous time this indicator decreased below 50 (red icon), it led to a month-long dip to the January lows at $32,917.
If BTC breaks down again, the next ascending support line (dotted) would be found at $37,500.
Channel breakdown
The two-hour chart shows that BTC has broken down from a descending parallel channel. It validated the channel as resistance on April 11 (red icon) before accelerating to the downside.
If the downward move continues, the closest support zone would be around $37,800.
Unlike the daily RSI, the two-hour RSI is showing bullish signs. Apart from generating a bullish divergence (green line), it’s at its most oversold level since January.
However, the price action shows no signs of a bullish reversal.
BTC wave count analysis
The long-term wave count suggests that an eventual upward move toward $50,000 is expected. However, BTC could still make another short-term low prior to doing so.
The most likely near-term count suggests that the ongoing decline is an ABC (black) corrective pattern. Giving waves A and C a ratio of 1:2.61 would lead to a low of $37,110. Subwave and minor subwave counts are shown in red and yellow respectively.
The potential $37,100 target would also take BTC all the way down to the support line of a potential ascending parallel channel.
