Bitcoin (BTC) has returned to a previous support area and may be in the early stages of creating a short-term bullish pattern.

Daily outlook

The daily chart shows that BTC is still hovering above the $56,500 horizontal support area. This is the 0.382 Fib retracement support and horizontal support. BTC bounced up from this zone on Nov. 19 and has now returned to it once again.

However, technical indicators in the daily timeframe are bearish.

The MACD, created by the short-term and long-term moving averages (MAs), is declining and is close to crossing the negative territory. This means that the short-term MA is moving slower than the long-term MA.

The RSI, which is a momentum indicator, has dipped below 50. This move is usually associated with a downtrend. In order for the uptrend to continue, RSI must restore this 50 line.

If a breakdown occurs, the next support will be found at $53,250. This is the 0.5 Fib retracement support.

BTC/USDT Daily Chart | Source: TradingView

Potential double bottom

The six-hour chart shows BTC developing a potential double bottom. This is a bullish pattern that often leads to a reversal.

Furthermore, it has been associated with a bullish divergence in both the RSI and the MACD. This happens when the price drop is not accompanied by a decline in technical indicators and often leads to a bullish reversal.

If BTC reverses, there will be stiff resistance at $60,730. This is the 0.382 Fib retracement resistance and the horizontal resistance area. Furthermore, it coincides with a potential descending resistance line that has been in place since the all-time high.

BTC/USDT 6-hour chart | Source: TradingView

Counting waves

The wave count shows that the drop since October 20 is an ABC correction (red), completing the longer term wave 2 (black).

Since wave A:C has a ratio near 1:1.61, it is likely that BTC is close to or has reached a local bottom.

The number of long-term waves is bullish, showing that BTC is in a large 1-2/1-2 wave formation.

The alternative short-term wave number is more bearish in the medium-term, but it still suggests that an upside move to $62,400-$64,000 is possible before another drop.

BTC/USDT 12-hour chart | Source: TradingView

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Disclaimer:  This article is for informational purposes only, not investment advice. Investors should research carefully before making a decision. We are not responsible for your investment decisions.