The Bitcoin price action is raising concerns after a failed attempt to push past critical resistance levels, with bearish signals now emerging. According to an analysis shared on TradingView by the analyst RLinda, Bitcoin could be on the way to reversing last week’s gains and correcting heavily due to the formation of a bearish engulfing pattern.
Failed Push Above $69,000 Marks Bearish Reversal For Bitcoin
RLinda’s analysis of the Bitcoin price trajectory is based on a new bearish engulfment candlestick pattern that is developing on the daily candlestick timeframe. Last week, Bitcoin experienced a notable rally that brought the cryptocurrency into a strong buying zone around $68,900.
Despite the bullish momentum, Bitcoin bulls were unable to push the price through the $69,000 resistance zone, encountering repeated rejections as the cryptocurrency pushed toward this level.
RLinda’s analysis noted that this inability to break higher has led to the formation of a bearish engulfment pattern over the past three daily candlestick bars, which could be a sign that the sellers are regaining control.
The bearish engulfment pattern, where the latest candle completely engulfs the previous day’s candle, is a strong reversal signal that suggests the upward momentum has exhausted itself. This pattern, combined with the failure to clear the $69,000 zone, indicates that Bitcoin could be facing a deeper correction.
RLinda’s goes further to highlight that the recent rally appears to have been a false breakout from the descending resistance trendline that has been in place since Bitcoin reached its all-time high of $73,737. The descending trendline has acted as a ceiling for Bitcoin’s price rallies since March. Although last week’s rally initially seemed to break through it, the subsequent rejection suggests the breakout was not sustainable.
Given this, the analyst notes that Bitcoin has now returned to a consolidation phase just below this trendline. As Bitcoin continues to consolidate, it increases the risk of deeper correction.
How Far Can A Bitcoin Price Correction Go?
Looking ahead, RLinda foresees a potential correction in Bitcoin’s price, with the first target for a decline set around $65,000. Should this level fail to hold, further corrections could see Bitcoin falling to $61,000, $58,000, and possibly as low as $57,000.
However, this bearish outlook is not set in stone. RLinda adds that the bearish structure could be invalidated if Bitcoin manages to break above $69,400. A break above would secure the bullish momentum and a sustained breakout above the descending triangle.
At the time of writing, Bitcoin is trading at $66,670, marking a 0.6% decline in the last 24 hours. The current price action aligns with RLinda’s prediction of consolidation below the descending resistance trendline.
In the meantime, the next few days could determine how much Bitcoin closes October (Uptober) in the green zone. Resistance levels to watch are $66,500 and $65,000, while support levels to watch are $68,400, $69,400, and $71,500.
Featured image created with Dall.E, chart from Tradingview.com