Bitcoin (BTC) Generates Bullish Divergences in Multiple Time Frames

BTC

Bitcoin (BTC) is trading inside a short-term bullish pattern and has generated bullish divergences in multiple time frames.

The weekly chart shows that BTC created a small bearish candlestick during the week of April 25th to May 1st. The candlestick was created in the same range that the price has been trading in since the start of 2022.

Technical indicators are showing mixed signals. The initial reading can be seen as bearish since the RSI and MACD are both falling. Additionally, the RSI is below 50 and the MACD is negative.

Nevertheless, the RSI and MACD generated hidden bullish divergences. Such divergences are often seen as signs of trend continuation. Their occurrence in the weekly time frame is rare and should result in significant upward movement.

Finally, it’s possible that BTC has been trading above an ascending support line since the April 2021 lows (green line).

Will BTC break out?

The daily chart shows that BTC has been declining since March 28. The decline led to a low of $38,376 on May 1.

The price rebounded at the $37,500 horizontal support area after this and is currently in the process of reclaiming the 0.618 Fib retracement support level at $38,600. This would be a bullish development because, in that case, there would be strong support between $37,500 and $38,600.

Similar to the weekly timeframe, the daily RSI also generated a bullish divergence (green line).

The six-hour chart also shows that BTC has been trading inside a descending wedge since April 17. The descending wedge is considered a bullish pattern, meaning that a breakout from it would be the most likely scenario.

Currently, BTC is trading at the wedge resistance line and the $38,600 minor resistance zone. The area previously acted as support and has now turned into resistance. Therefore, this is a crucial resistance level that could trigger a sharp upside if BTC manages to breakout.

Similar to both the weekly and daily time frames, there is a pronounced bullish divergence in the six-hour time frame. In this case, the divergence is also visible in the MACD, increasing its significance.

Price action and technical indicators suggest that a breakout of the wedge is likely.

Wave count analysis

The most likely wave count suggests that BTC has completed or is very close to completing the C wave of an A-B-C corrective structure.

Waves A and C now have a 1:1 ratio and all movement has been contained in an ascending parallel channel, increasing the possibility that the number of waves is correct.

This breakout fits with the price action, indicators readings, and the long-term wave count.

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