At the beginning of the April 15 session, we noted a bullish divergence in bitcoin, in the 1H chart. This is when price makes lower lows and the RSI makes higher lows. This does not always signal a reversal, but it reflects a slowdown in the bearish momentum and can often lead to some degree of consolidation if not bullish correction.
The 1H chart shows that indeed after the 3-point divergence, price started to rally. Then, it failed to test the lows around 216-217 and held above 220 for the most part. By the start of the April 16 session, bitcoin rallied almost to 228 where it is challenged by a previous resistance pivot and the 100-hour simple moving average (SMA). Also, the RSI just tagged 70, which shows a momentum shift to the upside.
Now, with the prevailing trend being bearish, the current rally might be faded. The near-term market is looking a downtrend that is overbought, which is pretty much a set up for “sell-on-a-rally” type of trade ideas. But remember, we are talking about the near-term chart, and in the near-term, the downside risk would be back towards the 222 area. Nonetheless, there is more risk of falling lower in the short to medium-term as well. The 1H chart shows a completed ABC correction so it has completed a minimal correction structure and could be ready for bearish continuation.
Now, if the market is not satisfied with a minimal ABC correction, it might rally towards the bottom of a previous consolidation seen in the 4H chart, around 230. Also note that here, price will be challenged by a falling trendline. If bitcoin does not turn lower in the April 16 session, look for resistance around 230, especially if the RSI is near 60. If there is a reaction here, we can expect the bearish trend to resume.
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