By Shelly Melancon (Switzerland)
Over the last seven days, the leading cryptocurrency has been bullish, but it now trades within a long-term dipping resistance level. However, it is likely to break out from this line soon.
Breaking Out From The Descending Channel
Between April 2021 and November 2021, BTC traded within the rising parallel range before bouncing off a local low of $32.92K last Monday. Then, it validated this range as support following the establishment of a long lower wick.
As of this writing, BTC continues to trade within the dipping resistance range, established when it reached a new peak price of nearly $70K two months ago. A breakout from this channel would see BTC face rejection at the $40.8K level. Hence, BTC would face local resistance a little higher than its current price.
Analysis From The Technical Indicators
The 24-hour MACD suggests that BTC is consolidating in preparation for a bullish move. The 1-day MACD, negative for nearly three months, confirms this consolidation phase. It is the second time within four years that BTC’s MACD on the daily chart would be negative for this extended period.
The most prolonged period that BTC’s MACD on the daily chart would be negative occurred between March and June 2021. The RSI also depicts a similar scenario to the MACD. An analysis of the 6-hour timeframe indicates that BTC is making a third attempt at breaking out of this descending channel.
BTC chart showing negative MACD period. Source: Tradingview
However, the breakout will happen soon since the resistance becomes weaker each time BTC tests them. Once this breakout happens, expect BTC to make a strong bullish move. Its next two crucial resistances would be the $46.76K and $51K levels, corresponding to the 38.2% and 50% Fib retracement levels, respectively.
BTC/USDT 6-hour chart. Source: TradingView
Analyzing The Short-Term Wave Count
BTC can move either of two ways based on the short-term wave count. First, it can complete a diagonal (which usually have a rising wedge form) as it’s already on wave four of this diagonal when measured from last Monday’s low. If BTC completes this diagonal, then it has already reached a bottom-out position where a breakout can happen at any time.
BTC’s completion of a diagonal move. Source: TradingView
Another option is for BTC not to complete this diagonal. Instead, it will divert from that diagonal-like movement to undergo a price correction. Thus, BTC could decline to the $35.5K range before making a bullish move. As of this writing, the BTC price trades at $38.47K.
BTC Market Bias Is Fear
The crypto fear & greed index, which monitors the performance of digital assets based on volatility, momentum and social buzz, indicates that the current market sentiment is fear. Hence, value investors may use this as an opportunity to increase their BTC holdings at a lower average dollar cost.
Historically, the market players often turn greedy after periods of fear. It is wonder that Microstrategy (a digital asset management firm) is investing most of its investors’ funds in the leading cryptocurrency.
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