Key Takeaways
- Bitcoin (BTC) created a bullish candlestick in April.
- The BTC price trades at a confluence of resistance levels
- Bitcoin broke down from a short-term parallel channel.
Bitcoin fell 32% after reaching its all-time high in January but reversed its trend in April, reversing more than half its losses.
The first week of May started with a decline as Bitcoin pulled back after hitting a significant confluence of resistance levels.
Today, all eyes are on the Bitcoin price to determine if the rally will continue this month or if the downward trend will resume.
Bitcoin’s April Close
Bitcoin created a bullish candlestick in April (green icon), breaking its successive bearish monthly candlesticks pattern.
The price increased from $82,540 to $94,181, regaining some previous losses.
Despite its increase, Bitcoin failed to move above the midline of January’s bearish engulfing candlestick (red icon), which started the downward movement.
The failure to do so puts the trend reversal at risk, making it possible that the bounce is a relief rally, especially if Bitcoin does not follow through in May.
What is also worrying is the fact that BTC trades in the lower portion of an ascending parallel channel, known as a corrective pattern.
In addition, the Relative Strength Index (RSI) generated a bearish divergence (orange) and is below 70.
While the Moving Average Convergence/Divergence (MACD) is positive, it also shows weakening momentum, indicating a possible breakdown.
If that happens, the closest long-term support will be at $60,000.
Therefore, despite the considerable bounce, the monthly time frame gives a slightly bearish Bitcoin price prediction.
Bitcoin’s Critical Resistance
The weekly time frame analysis shows Bitcoin is in a very precarious position.
After its increase, BTC reached a confluence of resistances between $94,000-$96,000, created by :
- A descending resistance trend line
- The $94,000 horizontal resistance area
- The 0.619 Fibonacci retracement resistance level.
While BTC briefly moved above two resistances (red icon), it failed to sustain the increase and created a long upper wick.
So, the current weekly close is highly critical for Bitcoin’s trend.
A decisive close below $94,000 could lead to a significant retracement, while the opposite is true with a close above $96,000.
Technical indicators are also at significant levels. The RSI is slightly above 50, while the MACD is close to making a bullish cross.
This week’s movement can help determine if the long-term Bitcoin trend is bullish or bearish.
What’s Next for BTC in May?
Finally, Bitcoin’s daily time frame gives a bearish outlook.
The wave count shows a completed A-B-C structure (green) in which waves A and C are the same length.
The price action shows a breakdown from an ascending parallel channel.
Finally, the RSI and MACD have generated bearish divergences, often preceding bearish trend reversals.
It is worth mentioning that since the rally began, this is the first time the RSI and MACD fell below 50 and 0, respectively (black circle).
So, a continued BTC decline this week will favor the bearish count, leading to a considerable retracement.
Correction Ahead
Bitcoin rallied significantly after its April 7 lows, creating optimism that the bull market has resumed.
However, the price action from different time frames suggests this is untrue.
Instead, Bitcoin may have reached a local top and could retrace significantly in May, reaching the $83,460 – $86,230 support.
Disclaimer:
The information provided in this article is for informational purposes only. It is not intended to be, nor should it be construed as, financial advice. We do not make any warranties regarding the completeness, reliability, or accuracy of this information. All investments involve risk, and past performance does not guarantee future results. We recommend consulting a financial advisor before making any investment decisions.
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