On September 2, Bitcoin formed a bearish engulfing candlestick and fell sharply towards the $ 11,200 support area. A rebound is expected from here, but then BTC may head towards $10,800.
Bounce and drawdown
The bitcoin (BTC) rate has been growing since August 27, when the price formed a double bottom on the chart in the support area of $11,200. On September 1, the pair reached a high of $12,065, just above the 0.618 Fibo level of the entire bearish move.
On September 2, Bitcoin formed a bearish engulfing candlestick, as a result of which the market retraced to the above-mentioned support area of $11,200. This drop occurred against the backdrop of significant trading volumes, which reinforces the significance of this price move. However, they are still significantly inferior to the volumes from July 27, when a bullish engulfing candle appeared on the bitcoin chart, which ultimately sent the price to a maximum of $12,473.
A break of this support area would target the bears at $10,800, where the wick lows from early August are.
On the daily chart, technical indicators are not giving reversal signals yet.
• The MACD previously rallied, preparing to enter the green zone, but reversed during yesterday’s decline and is now declining again.
• Stochastic RSI is oversold, but rejected the bullish crossover yesterday.
• The RSI is likely giving signals of hidden bullish divergence, but these are not yet confirmed and the indicator has dipped below the 50 mark for now.
Thus, the indicators cannot be called bearish, but there are no signs of a reversal yet.
In our previous analysis, we noted that the price probably started wave 5. However, yesterday’s decline cast doubt on this assertion. Perhaps the market is still within wave 4. In this case, the BTC rate is in the Y wave of the W-X-Y structure, which may end around 10,800. This is the 1.618 Fib level of the W wave, as well as the previous support area.
Given the amount of time it took for the price to complete wave 3, it can be assumed that the correction is already over-extended and could be completed by September 5th.
A closer look at wave Y reveals that it is represented by an A-B-C sub-wave. Wavelength A gives us a similar target at $10,710.
We have one more reason to believe that the price is still correcting. The previous growth phase (white in the chart below) looks corrective due to several overlaps, while the subsequent decline (black) is impulsive.
If the price starts an impulse rise, it may indicate the beginning of the 5th wave.
Thus, we expect that after the bounce, the BTC rate will decline towards the $10,800 area. After that, Bitcoin is likely to resume long-term growth.