Bitcoin (BTC) dropped as low as $31,500 before closing yesterday at $32,820. The coin is struggling to recover amid a bearish channel move today. A rebound available today increases the chances of the price breaking out higher.
A bullish pattern is forming on the Bitcoin chart.
BTC started July 14 with sellers. It initially dropped to $31,550 and almost touched the $31,300 horizontal support area.
However, with a rapid rise during the day, it reached $33,000. This move created a long wick on the daily chart and created an upside hammer candlestick that has been attributed as a bullish candle.
Despite the rising candlestick, the technical indicators on the daily time frame are bearish. This is particularly evident with the downside on the Stochastic oscillator (red icon).
The main resistance area is located at $40,550. This target can be seen as the 0.382 Fib retracement level and a horizontal resistance area.
BTC short-term channel movement
The two-hour chart shows that BTC has been trading in a descending parallel channel since June 30. Such channels often contain corrective moves, so a breakout from the channel is likely.
On July 14, the 0.618 Fib retracement moved very close to the support line of the channel (green circle) at the support area.
It is currently facing resistance from the middle of the channel (red icon). It must retrace that level to confirm a breakout.
This also causes both the two-hour MACD and the RSI to be bullish.
BTC wave count
The bounce from July 14 low looks like a five-wave structure, although it resembles a diagonal. If this is true, BTC could either find support at the 0.5 Fib retracement level at $32.370 or the 0.618 Fib level at $32.176 before it moves up.
It is also possible that the entire channel is part of a complex W-X-Y corrective structure. A breakout of the channel will confirm this and could pull BTC towards the range near $40,550.