Bitcoin Price Forecast: Uptrend Retained with Bounce off Key Support Zone

Bruce Powers
Published: May 2, 2024, 20:31 GMT+00:00

Bitcoin finds support at $56,500 after breaking down from a bullish wedge pattern, but potential bullish continuation remains if support holds.

Bitcoin found support at 56,500 on Wednesday following a drop below a lower trendline earlier in the session that formed a wedge pattern. That bull wedge pattern was negated by the drop as Bitcoin broke down from the pattern instead of up. However, support was seen just shy of the first target zone from 56,168 to 56,159. That price target consists of a 50% retracement level and an extended target from a falling ABCD pattern. The decline in the CD leg of the pattern is 127.2% (sq. root of Golden Ratio, 1.618) of the AB leg.

A screenshot of a graph Description automatically generated

Direction Should Clarify Before Mid-May

Of note is the intersection of the rising trendline and declining line at the top of the wedge. This week is the first time that the trendline has been approached since it was created, and it has a good chance of continuing to act as support as this is the first test as support. A clearer test of support around the line and first target zone may still occur.

If it continues to hold as support, an eventual bullish continuation for Bitcoin remains likely. Resistance would be around the 20-Day MA and top line of the wedge. Notice that they have recently converged identifying a similar price area. If a bullish scenario is to unfold an upside breakout above the line and 20-Day MA will occur before approximately May 16, as the two lines cross one day later. Until then, Bitcoin may consolidate within the lines.

Inside Day Breakout May Lead to Test of Resistance Lines

In the near-term, a bounce up to test resistance around the lines is possible if today’s high is exceeded. Today is likely to end as an inside day with the closing price near the day’s highs. At the time of this writing the day’s high is 59,588. The 20-Day MA is currently at a price of 63,490.

Drop Below 56,159 Likely Leads to Lower Price Zones

Nevertheless, a bearish signal would be indicated on a decisive decline below 56,159. Bitcoin would then be heading towards a potential support zone from around 53,000 to 51,639. The top of the range was the prior trend high from February. Lower still is potential support around the 200-Day MA at 49,489, the previous trend high from January at 49,102.

As of this week’s low, Bitcoin has fallen by 23.4% from the recent record high. That is slightly more than the previous four retracements covering the advance that began off the November swing low. Therefore, it is already showing slightly more weakness than during prior corrections. So, a further correction will clearly exceed the prior and could lead to more aggressive selling.

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About the Author

Bruce boasts over 20 years in financial markets, holding senior roles such as Head of Trading Strategy at Relentless 13 Capital and Corporate Advisor at Chronos Futures. A CMT® charter holder and MBA in Finance, he's a renowned analyst and media figure, appearing on 150+ TV business shows.

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