BTCUSD Perspective And Levels: How Low Can It Go?

BTCUSD update: Price establishes lower high at 3808 and is poised to push lower, but the question is how low? I am going to present some possibilities based on Elliott Wave and Price Extensions. This chart further explains why I will not go long ETHUSD at current prices for a swing trade.

In my previous report I talked about the double bottom on the 4 hour ETHUSD chart and price pushed back up above the 270 resistance. Some may wonder, why wouldn't I talk about that as a trading opportunity? The reason is, that particular price action does not fit within the criteria of my swing trading plan. That doesn't meant it can't be considered as a smaller time frame trade, like a day trade, but that is up to you. I do not write about day trade opportunities and setups because there is too much complexity and adjustments that have to be made for that type of trading especially to report in a timely manner. My goal here is to provide analysis that offers perspective and to help you make better decisions in general, but the emphasis is on swing trading.

With that being said, I am waiting for a setup in ETHUSD that can get me in for a broader move, and since I am not shorting these markets at all, that means I can only wait for a long setup in the right environment. Since all the alt coins are following BTC, I am using this market to provide clues for timing such a trade.

In terms of Elliott Wave, this market has established lower highs at 4120 (Wave 4 of C), and at 3808 which may be the beginning of Wave 5 of 5 which is likely to complete the corrective Wave C. A measurement of the current price structure reveals the 4.618 extension around the 2824 area which is located within the 3024 to 2497 support zone (.618 of the entire recent bullish swing). Also it is important to note that the 3003 level is the peak of the broader Wave 3 that was established in June of this year (see weekly chart). A retest to slightly lower levels makes sense and would be a convenient area for a completion of the corrective wave structure. (It would also be a very large double bottom relative to the 2980 low).

This scenario can take a week or more to play out and will require a significant catalyst or series of catalysts to drive the required momentum. I will be watching for a break of the 3490 weekly low, which is the first sign that this extreme low scenario is more likely to unfold.

So how is this information useful? For one, I will not buy anything at the current price levels. If price is going to build a bullish argument from here, it needs to take out the lower highs and establish a clear bullish structure. That means 3955 needs to be taken out, followed by a higher low. There may be fluctuations that offer opportunities on smaller time frames (like in ETHUSD), but until the market shows clear signs of resistance being taken out, on the swing trading time frame, this price action doesn't offer attractive reward/risk.

In summary, make sure to separate your perspective by time horizon. Big picture and small picture can be very different and present relative opportunities along with their own degree of risks. As a swing trader, my risk parameters are clearly defined and if the market does not align with my requirements, I simply stay flat until it does. This market, the leader of all coins, still has room to test lows and the price structure to support that scenario. Using this information helps shed light on the fluctuations in the alt coins that may look more promising than they really are. If strength intends to come back to this market sooner, it will prove itself through the appropriate price structure and I can adjust from there.

Comments and questions welcome.