Bitcoin (BTC/USD) is showing bearish daily candles below the 21 ema zone on the daily chart. The bearish breakout is invalidating our own wave 4 (pink) analysis.
Despite the strong bearish momentum, the overall uptrend is still valid although price action will need plenty of time before recovering. Let’s review.
Price Charts and Technical Analysis
The BTC/USD decline is certainly very strong – perhaps news was a catalyst. In any case, the bearish fall is likely to scare investors away from BTC/USD for the moment. Either by creating more sellers or stopping buyers from making a purchase.
Let’s analyse the daily chart first:
- Price is falling steeply below the 21 ema zone and the HMA 20 has a strong bearish angle.
- But the long-term moving averages are all bullishly aligned with the 21 ema zone above the 144 ema, which is above the 233 and 610 emas. The uptrend remains intact.
- A weaker form of a divergence pattern was visible (purple lines), which means that price could decline as far as the 144 ema zone.
- But it seems that a wave 3 pattern (purple) has been completed when looking at the AO bars (green box).
- The swing started on the left of the green box and ended now with the AO bars crossing from above the zero line to below the zero line.
- The impulsive and strong push up is probably a wave 3 (purple) and unlikely to finish the entire uptrend.
- If price action is making a retracement (orange arrows) within wave 4 (purple), then the shallow Fibonacci levels of the wave 3 should act as support. It will therefore be important to see how price action responds to the 38.2% and 50% Fib.
- A bullish bounce at the Fibonacci level could indicate the end of the decline and confirm a potential wave 4. But the wave pattern 4 is probably not completed yet. A lengthy ABC pattern (pink) is likely to emerge before any uptrend resumes (blue arrow).
- A break below the 50% Fib places the wave 4 and uptrend immediately on hold (orange circle). A deeper break invalidates it (red circle).
On the 4 hour chart, we see that price action was unable to make any significant bullish bounce at the 144 – 233 ema zone:
- The bearish breakout confirms a 123 (grey) pattern down rather than an ABC.
- The bearish momentum is strong and is probably a wave 3 (orange).
- Any bullish pullback is probably just a wave 4 (orange) and will probably find a new wave of sellers that can push price action lower.
- A strong push up invalidates the bearish wave analysis on the 4 hour chart.
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