Bitcoin (BTC) has reclaimed an important short-term horizontal level but is still trading in a bearish pattern.
Bitcoin has been falling since hitting a local high of $42,976 on April 21. The downward move led to a low of $37,700 on April 26. The decline initially caused a breakdown (red circle) of the $37,700 area, which had served as support since April 18.
However, the price has been moving upwards since and reclaimed the area on April 27. This renders the previous breakdown just a deviation, which is considered a bullish development.
Currently, BTC is trading between the $37,700 support and the $40,700 resistance zone.
Bullish divergences
The daily BTC chart suggests that an upward move is likely to follow. The reason for this is the bullish divergence that has been developing since April 10.
Such divergences in the daily timeframe often precede significant uptrend reversals.
The six-hour time frame supports this possibility since it shows bullish divergences in both the RSI and MACD.
If BTC manages to break out of its range, the next resistance zone would be found at $43,000. This objective is the resistance level at the 0.5 Fib retracement.
Short-term BTC movement
Despite the bullish signs from the six-hour and daily time frames, the price action in the two-hour chart is bearish.
The reason is that BTC is trading on the support line of an ascending parallel channel. These channels usually contain corrective movements, which means that a failure of this one would be likely.
A breakdown from the channel and decrease towards $37,000 would also fit with a potential wave count that suggests that BTC will drop to $37,000. This would give waves A and C an exact 1:1 ratio.
In both cases, a bottom seems about to be reached.
