Bitcoin Aims to Build Support After Breakout
On July 21, the Bitcoin (BTC) price created a bullish engulfing candlestick, breaking out above an important resistance area and moving average (MA) that had previously been hindering Bitcoin’s advances.
This could indicate that its consolidation period might be over and BTC has begun a new upward trend.
Bitcoin Builds Steam
Since July 8, the Bitcoin price had mostly been trading below the $9,250 area and 50-day moving average (MA) and faced resistance from both.
Yesterday, the price created a bullish engulfing candlestick with significant volume, finally breaking out from both the resistance area and the MA. While these are both significant bullish signs, there is some hidden bearish divergence developing in the daily RSI. This is a bearish signal, but will likely not be enough to offset a larger breakout.
If the price continues increasing, the next closest resistance area would likely be found near $9,700. If the price were to decrease instead, which seems unlikely at this juncture, the ascending support line would offer support around $9,000. Below this, there is a horizontal support level at $8,700.
The 6-hour chart also shows a breakout from a descending resistance line that had been in place since the June 1 high. The line was broken on the fifth attempt, but we can see a minor resistance area at the previous local high of $9,450.
The short-term chart shows an upward trend that began on July 16. While the movement was initially contained in a parallel ascending channel, BTC broke out yesterday with considerable volume.
The movement resembles the beginning of a five-wave Elliott formation with an extended third wave. The current correction is expected to reach the resistance line of the channel before the price resumes its upward movement.
The 15-minute chart shows that the price has broken down from an ascending support line and validated it as resistance afterward. It is currently completing an A-B-C correction inside a descending channel.
The two most likely levels for this correction to end would be either at $9,290, the middle of the short-term channel and resistance from the previous channel, or the $9,230 level, the bottom of the short-term channel, and mid-range of the longer-term channel.
To conclude, Bitcoin’s breakout yesterday indicated that the price might have begun a bullish trend. After the current retracement is complete, BTC is expected to move upwards towards the outlined resistance areas.
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