On August 25, Bitcoin formed a bearish engulfing candlestick and fell sharply. Perhaps this was the beginning of a correction that could send BTC below the $11,000 mark.
The bitcoin (BTC) rate dropped sharply on August 25, forming a bearish engulfing candlestick on the chart and breaking the upward support line that had accompanied the pair since July 28. This bearish breakout occurred amid above-average trading volumes.
The MACD indicator on the short-term chart is giving bearish signals and declining. On a longer timeframe, it has lost its strength and is moving south, but has not yet entered the red zone.
If the price continues to decline, then two main support levels can be distinguished:
- $10,900 – formed by late July wick lows and 50-day moving average (MA)
- $9,900 – formed by the highs of the May-June range
There is almost no other support between these two levels.
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On the weekly chart, the BTC rate bounced off the $12,200 area and formed a shooting star candlestick pattern, which is considered to be a signal of a bearish reversal if it appears after an uptrend.
The nearest support area on this timeframe is located at $9900. Technical indicators promise a possible weakening for the pair. The RSI is declining towards 50, while the short-term MACD is also moving south.
However, the long-term MACD is still bullish. This suggests that the expected decline will turn out to be only a correction, followed by a resumption of growth rather than the development of a decline.
Where will the correction end?
The most probable scenario is a scenario in which the price is now in the 4th wave of a five-wave structure (black on the chart). The 2nd wave completed in the area of Fibo 0.618, so it makes sense to expect that the 4th wave will complete in the area of Fibo 0.382 at $10,945. This corresponds to the previously indicated support on the daily chart.
The 0.618 support level at $10,220 does not coincide with the support areas we highlighted above, so we will ignore it for now.
Fibo level 0.786 Fib at $9705 is located near the support of $ 9900, indicated on the weekly chart.
Thus, the two levels at which one can expect the end of the bitcoin correction are located at $10,900 and in the $9700- $9900 region.
The previously mentioned wave 4 is represented by the A-B-C structure (blue), and now the price is in wave C. The two most likely reversal levels of this wave can be Fib levels – either 1.0 or 1.61 correction of wave A.
They pass at $10,900 and $9955, respectively, confirming again that it is in the area of these two levels that the correction should end.
However, if we build an upward parallel channel, connecting the tops of waves A and B, we will get a minimum exactly in the $10,900 area, where the price should be in the next few days.
$9900 or $10,900?
However, wave C is always represented by a five-wave structure (shown in orange on the chart), and now it is inside the 3rd wave. Considering the length of the 1st wave, as well as the fact that the 3rd wave cannot be the shortest, it seems likely that the structure will complete its formation in the region of $9,900 rather than $10,900.
In this case, one should expect a bearish breakdown of the $ 10,900 area and only then retest it as resistance (wave 4).
In addition, neither the RSI nor the MACD are showing signs of a reversal, which would indicate that price is bottoming around $10,900.
Below is a sub-wave analysis of this possible structure, where the orange lines follow similarly colored lines in the previous chart, while the green and red lines represent sub-waves and sub-waves.
Such wave analysis is quite common, given that the 3rd wave is expanded in each of its sub-waves.
Below we provide an alternative pattern, according to which the correction will end at $10,900. Since the 3rd wave cannot be the shortest, but it will be shorter than the 1st wave, if the correction ends around $ 10,900, we will have to deal with a truncated 5-th wave.
However, such a structure would be extremely atypical.
Thus, the bitcoin rate is making a correction, which should end around $9900. There is also the possibility that the correction will end at $10,900, but this is a less plausible scenario. In addition, the price does not give any signs of a reversal to confirm it.