Bitcoin (BTC) has failed to reclaim the $40,000 area and could potentially decrease to complete the final leg of its corrective phase.
Bitcoin began rising on April 11 and hit a local high of $41,561 on April 13. However, it was rejected and declined sharply the next day.
This decrease created a bearish engulfing candlestick (highlighted). This is a type of candlestick pattern in which the entire previous decrease is negated within one day.
Following the creation of this pattern, further declines may occur.
Bearish technical indicators
The daily time frame paints a bearish outlook for BTC due to the decreasing MACD and RSI. The former is already below 50 while the latter is negative. These are considered signs of a bearish trend and suggest new lows are likely.
The six-hour timeframe is showing some signs of a relief rally. This shows that the RSI is extremely oversold and has started to rise. Its trend line is also still intact. A similar occurrence is visible in the MACD.
If the BTC price were to make a lower low, it would likely generate a significant bullish divergence as a result.
BTC Wavenumber Analysis
The long-term wave count suggests that a possible upward move towards $50,000 is expected.
However, BTC is still correcting in what seems to be an A-B-C structure (red). So, a potential target for the bottom of this movement is found near $37,000. This would give waves A and C a 1:1 ratio and would coincide with the support line of an ascending parallel channel.
Once the correction is over, BTC might start climbing towards $50,000.
The short-term count suggests that BTC has completed sub-wave four (yellow). Using the length of wave one (yellow) and the external retracement of wave four (black), a similar target of $37,800-$37,600 is given for the bottom of the correction.
