Bitcoin price correction started yesterday after we spotted a “Bearish engulfing” candlestick pattern on the 4 hour (BTC/USD) charts throughout yesterday’s analysis. Price correction pulled the price all the way down to $390, but thereafter we started spotting signs that signaled cessation of the downside price correction attempt.

Price Correction Slowing Down on 4 Hour Charts:

By analyzing the 4 hour (BTC/USD) charts from Bitstamp; executing Bollinger Bands and keeping the 38.2%, 50% and 61.8% Fibonacci retracement levels we plotted during, we can conclude the following:

Bitcoin price started dropping yesterday after it overshot above the 61.8% Fib retracement level ($478.64). The downside price correction wave started after a “bearish engulfing” candlestick pattern was evident on the charts (the grey ellipse on the lower chart).

Bitcoin price continued to drop until it dipped down below the 50% Fib retracement level at $416. Below $416, the trading pattern started forming candlesticks with long downswards shadows which reflect the strong support the price is getting below $416 at this point. A “doji” was formed before the arrangement of bearish candlesticks was halted by a greenish bullish candlestick.

Due to the strong support below $416, the price is expected to rise again to attempt piercing the $416 resistance level again.

Bullish Wave Slowing Down On 1 Day Charts:

By studying the 1 day (BTC/USD) charts from Bitstamp (take a look at the below chart); plotting the 20,50 and 100 EMAs and executing the Relative Strength Index (RSI), we can conclude the following:

A “pseudo” doji has been formed yesterday which reflects slowing down of the bullish wave that has been advancing at a high tempo.

Even though bitcoin price started dropping yesterday, it is still way above the 20, 50 and 100 EMAs.

The RSI value is averaging 80 (>70), yet the curve started forming a downwards slope, so we can see it drop below 70 soon as the bulls take control again over the market.

Conclusion:

Bitcoin Price correction attempt is slowing down after dropping to $390. Technical analysis of the charts signals continuation of the bullish wave within the next 24 hours or so.

Charts from Bitstamp; hosted on Tradingview.com