BTC may have created a short-term double top pattern.
Bitcoin (BTC) is showing several bullish signs in the daily time frame but has yet to break out of a short-term corrective pattern.
Bitcoin has been on the upswing since hitting a long-term low of $17,622 on June 18. On July 19, it broke a long-term descending resistance line, which had been in place since the end of March.
Short Term BTC Pattern
On August 11, BTC hit a local high of $24,918, which was the highest since June 12. However, he failed to sustain this rise and created a long upper wick on his daily candlestick.
If the up move continues, the closest resistance area would be found at $29,370. This target is the 0.382 Fib retracement resistance level.
An interesting reading comes from the daily RSI, which moved above 50 at the same time that the price broke out of the descending resistance line.
Since then, the RSI has created an ascending triangle, which is often considered a bullish pattern. The indicator is currently at 61, right at the resistance line of this pattern.
Therefore, a break above would also likely cause the price to accelerate to the upside.
Despite the relative bullishness of the daily time frame, the six-hour chart shows that BTC has been trading within an ascending parallel channel since the June 18 low. Such channels generally contain corrective patterns, meaning that an eventual breakout would be expected.
Additionally, the price has created what resembles a short-term double top, which is considered a bearish pattern at the resistance line of the channel.
On August 9, the price bounced off the middle line of this channel and off a short-term ascending support line.
Therefore, if BTC breaks out of the channel or support line, it will likely determine the direction of the future trend.
Wave Count Analysis
The main wave count indicates that BTC is likely to be in wave three of a five-wave-up move. The sub-wave count is shown in yellow and it also suggests that the price is in wave three. So this appears to be a 1-2/1-2 wave formation. If correct, it would mean that the upward movement will accelerate in the near future.
For the count to remain correct, Bitcoin must stay above the original 1-2 slope.
The most likely long-term wave count is also bullish, lining up with the proposed short-term count.
The truth is that new data on inflation in the United States, released this week, was a catalyst for the long-awaited change: Bitcoin and altcoins rose at the same time as equities, and the consumer price index (CPI) for July insinuates that inflation has peaked.
The S&P 500 and the Nasdaq Composite Index gained 2.1% and 1.9%, respectively, on the day of publication, August 10. The BTC/US$ pair, in turn, set a daily candle around US$900.
Still, instead of accumulating optimism, market commentators were anything but bullish as it turned to dust.
Investor Raoul Pal, for example, stated yesterday on Twitter that, “this seems to be one of the most hated rallies I’ve seen in quite a few years in equities.”
Predicting a major turnaround in the crypto space, popular trader and analyst Il Capo of Crypto pinned the $25,500 mark as the likely maximum target before a new downtrend begins.
“BTC pumped almost 40%. There is a huge possibility of a pullback. Buy on the dip,” he explained via Twitter.
As usual, the best course of action is to do your own research before making decisions.
By Audy Castaneda
