Bitcoin Potential ABC wave based on MACD and RSI similarities

2021年9月30日

It has become apparent that bitcoin is setting a lower high. With a move as impulsive as bitcoin experienced it is natural to look for an ABC correction after such a move. There are many ways that the price action and charts could develop but the ABC correction is one of the simplest and most fundamental moves that can exist in any analysts tool box and the nice thing is target setting isn't all that difficult. The hard part is sticking to the plan when the emotions start to get high.

The Analysis
The charts have a lot of similarities. First would be a high that was reached impulsively and then enough sideways and down action to create a MACD-Singal cross and the MACD going below zero. That happened in the 2014 bear market and we can see it has happened again. The B wave created a bullish MACD-Signal line cross that has not been sustained and when the MACD crossed the signal line again it was about 23 weeks from the cross to the low at $164 (not shown). The current price action has created the same bearish MACD-Signal line cross and this prospective (for now) B wave created a bullish MACD-Signal cross that has not been sustained. We are part way through the week but if the pattern holds the MACD will continue downward with price action and the MACD will go zero before it crosses bullish again.

Not only has my prospective B-wave created the similar structure on the MACD but it has done the same with the MACD-EMAs. I like to visualize the MACD-EMAs for such a purpose. MACD crosses can have a lot more detail added when you also compare the crosses to what is happening with the EMAs. This price action popping above and then below is very telling, and hopeful for traders, predictive. If this pattern holds we won't see the MACD EMAs crossed bullishly until after the new low is in.

The price saw strong wicking below the 1 line of the fib extension on the first touch and the second touch saw price action only go below the 1 line by a dollar. That second touch also occurred as price action got above the resistance trendline created by the tops of the ATH and the B wave. At this point time will tell which fib extension level would be reached if we are truly in an ABC correction. No matter what of I am broadly correct the extension levels remain the same, what does change are the buy areas for more dynamic trading systems would suggest. So far the two big boys for calling the lows on BTCUSD have been the 200w SMA and the bottom of the monthly Keltner channel. Historically those have both done a great job of calling the lows on a monthly basis and may continue to do so from here on out. Right now the gap between the 200w and the bottom of the Keltner channel is pretty wide but if we continue sideways for a while they should meet up again.


The RSI for now is just to be watched. It helped find the low in 2014 when it approached 30 on the weekly.

Trades
The first technical trade under this assumption is to short the C leg down. There are various entry strategies but a simple one has us looking at the weekly Heiken Ashi chart. The two red candles with no top wicks suggest that the momentum is picking up to the downside and it is unlikely that any rally will go beyond the high around 53k. Shorting daily strength or looking for bearish structures for entries would be advisable, if I was qualified to give advice which I am not (lol). And you guys on your phones are gonna squint at the next chart.



The next trade after that would be long entries. The strong handed accumulators would be buying around the low of the monthly keltner or the 200w as they had before. More cautious traders would be looking for price action to close weekly candles above the trendline from ATH to the top of the B wave. That is a ways off. This is long term planning and so this idea is not for day traders or perhaps most swing traders. I hope to be able to accumulate for a year or more before this starts to move again.