Bitcoin (BTC) price continues to trend lower, marking 5 consecutive lower highs as the price makes a stairstep decline in a falling wedge. Interestingly, the pattern is interpreted by many analysts as a signal of a potentially bullish outcome so perhaps there is still hope.
Crypto market data daily view. Source: Coin360
BTC USD daily chart. Source: TradingView
The price has pierced the $8,674 support three times over the past 4 days, increasing the chance that the price will drop to the lower trendline of the falling wedge at $8,480. The daily chart shows that Bitcoin had spent the week riding along the 200-DMA, a point which was lost earlier today.
The volume profile visible range (VPVR) shows a volume gap between $8,780 and $9,062, meaning the Bitcoin could rally 3.45% to $9,062, a point which would bring the price above the 50-DMA and slightly below the Bollinger Band indicator moving average at $9,121.
A move to $9,148 would set a 3-day higher high at the 100-DMA, bringing Bitcoin price out of the falling wedge and possibly serving as the first indication of a short-term trend change for investors. A pop above the falling wedge resistance would bring the price above the 50% Fibonacci retracement level, a point thoroughly discussed in a previous analysis.
BTC USD daily chart. Source: TradingView
A move to the Bollinger Band indicator moving average at $9,121 would also bring Bitcoin price to the 61.8% Fib retracement level from the Oct. 25 move from $7,400 to $10,540. Bearish traders are calling for a much more significant drop and taking a bird’s eye view of the rally from $3,127 to $13,800 shows that the 61.8% Fib retracement level is situated at $7,840.
BTC USD daily chart. Source: TradingView
This point is also strongly supported (3rd pink bar) and failure to bounce at this point could see the price sink as low as $6,846, the lower trendline of the larger descending channel beginning at the 2019 high. Bounces from this trendline have been strong and previous analysis and the VPVR suggests the $8,300 to $7,800 range as a possible support area where buyers are expected to show interest.
Bearish scenario
Taking a macro view of Bitcoin’s price action on the daily timeframe (chart above), further downside moves in the falling wedge could see the price drop to the support levels (pink bars) at $8,591 and $8,305. In the event of a falling wedge breakdown, the price could drop to $7,862 but before this happens it’s probable that buyers will have stepped in around $8,300 and $8,000.
BTC USD 4-hour chart. Source: TradingView
At the time of writing, the 50-day moving average (DMA) and the 200-DMA are converging on the 4-hour timeframe, forming the oft-discussed dreaded death cross that traders have worried about at length over the past two weeks.
Bullish scenario
On the 6-hour (or one can view the 4-hour chart above) timeframe traders will spot a divergence within the relative strength index (RSI). Given that falling wedges have a tendency to flip bullish, some traders might interpret this divergence as additional proof that Bitcoin could be on the verge of a trend reversal.
Possibly, Bitcoin’s price will continue its current trend, bouncing off the support and resistance line of the falling wedge until price reaches the second (pink bar) support at $8,300 where buyers might show up to push the price back to $8,650.
As mentioned earlier in the analysis, a high volume spike could see the price rally to $9,060, which would be a 9% gain from $8,300. Given that Bitcoin’s trading volume has reduced to a trickle and the current price action looks bearish until $8,373, traders are likely in cash, waiting to see if they can catch a bounce at $8,460 and $8,300.
The views and opinions expressed here are solely those of the author (@HorusHughes) and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.