Bitcoin (BTC) erases recent gains, but reason to stay bullish

Bitcoin (BTC) erases recent gains, but reason to stay bullish

Bitcoin (BTC) dropped sharply on September 13th, casting some doubt on the legitimacy of the previous bullish move.

Bitcoin reached a high of $22,799, briefly moving above the 0.618 Fib retracement resistance level of the entire previous downward movement (red symbol). It seems that the rally also caused the recovery of the support line of the previous ascending parallel channel.

However, the price failed to sustain its bullish move and fell sharply on the same day, creating a massive bearish engulfing candle that led to the low of $19,860. The rejection validated the 0.618 Fibonacci retracement resistance level and the previous support line as resistance.

If the downward movement continues, the nearest support area will be at $19,000.

Wave Number Analysis

Obviously, the increase since September 7th looks like a five-wave bullish move. Therefore, it makes sense that the resulting decline is part of the corrective ABC structure. However, the fact that the decline was very sharp, immediately reaching the 0.618 Fibonacci retracement support level (black) casts some doubt on this possibility.

Since there are many possible long-term wave numbers out there, it’s safe to say that the wave number is still unclear.

However, the most likely move indicates that an increase towards the 0.5-0.618 Fibonacci retracement resistance levels (white) is expected before another decline. The above resistance is from $21,300 to $21,660.

BTC dominance rate

An interesting development during yesterday’s drop is that the Bitcoin Dominance (BTCD) rate fell sharply during the BTC price decline. However, despite this drop, BTCD appears to have broken out of its descending resistance line and the daily RSI has moved above 50 (green icon).

Both are considered signals of upward trends. Therefore, they support an upward movement towards the 0.5 Fibonacci retracement resistance level at 43.70%.

The weekly chart supports this possibility, as it shows that BTCD is trading inside long-term support at 40.50% and has created a bullish candle on the weekly time frame. Moreover, the weekly RSI produced a significant bullish divergence, in line with the daily time frame readings.

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