Bitcoin (BTC/USD) is showing a bearish pinbar Japanese candlestick pattern (purple arrow), which indicates a reversal, retracement or exhaustion within the current uptrend. Price has indeed started to fall from that price zone, but what’s next?
Although BTC/USD is showing bearish price action, in my view it is probably only a retracement within the larger bullish trend and momentum (blue arrow). By placing the Fibonacci tool on the bottom to top (blue boxes), we are able to detect the key Fibonacci levels which are primarily the 38.2 and 50% in this case (due to the fact that price is probably in a wave 4).
BTC/USD seems to have completed a wave 3 (purple) and price is now building an expected wave 4 (purple) corrective chart pattern, which could be a bull flag or triangle for instance. Once the correction is completed, we are expecting price to break above the pattern and move up higher as part of a wave 5 (purple). The invalidation level of the wave 4 is if price moves below the top of wave 1 (purple) which is indicated by the purple box. Keep in mind that wave 4s typically stop at the 23.6%, 38.2%, and 50% Fib levels so a break below the 50% already makes a wave 4 scenario less likely. Once price completes a wave 5, then a bearish ABC is expected to occur within a wave 2 or B after which a strong bullish upside is expected for wave 3 or C.
Price is building a consolidation zone (purple arrows) on the 4 hour chart. Price could be building different types of chart patterns within the expected wave 4 (purple) correction but we are not expecting a break below the 50% Fibonacci level, support zone (purple box), and long-term moving average (green box). The Fibonacci levels (green box) should act as a support zone and only a break below the 61.8% (red box) makes that unlikely.