BTC has completed 5 waves down from 11.7 to 7.3k, with an extended wave 1.
view: This was wave 1 of the final wave 5 down from the top.
view: This was wave 2 of the of a five wave impulse up from the $6k low.
It is now in the important wave that will likely provide the key indication of or views and therefore where it will be going over the next few months: $3k or $20k+. This current wave will either be a corrective leg to around 10k which flips into a long 3rd wave down or it pushes through the 10k with an impulse wave up which could see new ATHs at $20k+.
My bias is until I see the break of the 10k. However, I intend to trade through this process, managing risk using EW, Fibs and trades with clear targets and stops which present a opportunity.
The more detailed chart below shows the setup I am looking to trade in the short term. There is resistance forming on both price action and . It may go straight up from here. However, a retrace could come soon and will present a buy opportunity if it goes as far as the 0.786 level (7.6k). This will give a of 6:1 on a trade with a target of 9.8k and stop at the low of 7.3k.
This is the chart of the 20k scenario:
Some traders look to enter this pattern on a breakout above but I find this more risky with BTC because (a) the number of fake breakouts (whale manipulation?) and (b) the fast pace of breakouts delivers an execution price quite a bit higher than the actual breakout area which then result in a larger stop loss and much lower risk return. My preference is to go in early and then if it looks to be going my way, I move the stop loss up to the entry price to protect against a fake breakout.
RSI is overbought on the sub 15 minute time frames so a little bit of consolidation will occur before it can go up again.
One trade option is to wait for it to revisit the breakout line and then enter a buy there with a stop just below the line. The problem with this is that there are only two points on that upper trend line so it is not particularly clear where the breakout line is. No trade for me on that pattern.
I'll hold tight and now be looking either for a retrace to the 0.618 (7.9k) to 0.786 (7.6k) area to buy in. However, the big trade I am looking to do is short at the 9.6-10k area.
Reversal in the area of 9470 - 9900 which coincides with the following:
1) 0.786 - 1 ext of A wave from 7.2k to 8.7k
2) Top of Wave 2 on way down from 11.7k and numerous other resistance around that time
3) 0.5 - 0.618 retrace of the wave down from 11.7k to 7.2k
4) Linear diagonal trend line from ATH and 11.7k
My stop will depend on how early I enter but provisionally I will be looking to have it just above 10.1k, which, depending on timing, will hopefully coincide with the log diagonal long term trend line.
Target is initially the 7.2k but I would likely let it run (shown in orange).
This could just be the first leg of an impulse up and so I will be mindful of a retrace from here which then moves into the 3rd impulsive wave up (shown in blue).
I placed a highly speculative small short just at the top of the breakdown near 8800 with a very tight stop of 8805. I'll let this ride to 8000 or get stopped out at my entry price for a nil gain/loss.
I can see the potential of a corrective ABC forming with A completed at 8700 and an extended (1.618) 5 wave C forming. If the 8.6k holds (or 8.4k 0.786) and BTC goes up from here, an ABC pattern is reinforced by this 0.618 as the 1st wave of the C leg. This would increase my bearish bias but will kick my stop on the last trade into touch (at 0 profit/loss).
Under the bullish scenario we should be in an impulsive start of the Major Wave 3 (see chart at the top). I am struggling to see a clear wave 1 and/or wave 3 here. Maybe we are still in wave 1 or maybe wave 1 is done as they can often be really small in BTC? Or maybe the waves are hard to see because the impulsiveness of them means the retraces are very small. If this retraced to around 8k (0.618) I think it would be easier to argue for wave 1 or wave 3 completing. However, even then, this could be an ABC with a 1:1 on A and B.
... and of course, we can just head south from here.
I'm slightly contradicting myself as I am bearish but I am targeting a bullish retrace ($8k) on this trade. I suppose this demonstrates how close I think this call is between the bulls and the bears. In summary, on the small scale, until we breach or reject the high 9ks, EW analysis doesn't provide a lot of assurances to either scenarios but they and the fibs do give indications of potential trade zones to make a call one way or the other and if placed right should allow for tight stops which risk little or can end up being breakeven.
It could of course go all the way back up or down from here and I will continue with my earlier plans.
Now I need to decide when to exit. I can see a wave structure which could be an ABC 3-3-5 (1:1.618 for A:C). However, I will continue to trade an ABC with a 1:1 ratio for A:C, which would target around 8150. However, I have placed a stop on both orders at 8562, which is just above the 0.5 retrace of this last wave.
At that point I will consider going long also.
I have now moved the stop to entry.
- 1:1 extension of the wave down from 9200 to 8450 is 8050
- 1:1 extension of the wave just completed from 8800 to 8300 is 8100
- 0.618 Retrace of the wave up to 9200 is 8050
This could however go to a ABC of 1:1.618, giving a target of 7600 - 7800.
I will exit my shorts at that point. I will then wait to see if there is a bounce to go long or further weakness to re-enter my shorts.
My next trade will likely be a short or long around the 9.5-10k area.
1) This current retrace to go slightly further, to 8.3k with a reversal signal to enter a small long. Stop at 8.2k. To then sell on a reversal further up in the ABCDE formation before breaking out to test the long term trend line.
2) The current support to break down to sub 8k, to then enter a short trade.
I think the price action over the coming day or two should confirm either of these and provide the set up to place a large decisive trade long or short. If this C wave is unable to hold the support at 8.2k and breaks down to 7.6-8k, I would be trading the scenario 2, otherwise, I'll continue to trade scenario 1.
Scenario 1 : Triangle on W - E to break up
Scenario 2 : Triangle from 7.2k - E to break down
Stop: 7499 (bottom of support area) or
Target : 8850
Stop : 7250 (double bottom)
Target : 8850
- 7800 : 1.272 extension of the recent wave A from 9046 to 8665
- 7700 : 0.236 retrace of wave up from 7.2k
- 7600 : 1.618 extension of wave A from 9.2 to 8.3k
- 7550 : 1.618 extension of the recent wave A from 9046 to 8665
I'm not trying to catch a falling knife. My conviction is 7600 buy in but I will buy in earlier if I see RSI divergence. If it does a V I'll miss out unless that is bang on 7.6k.
Target : 8800 ( to be confirmed)
RSI divergence on 1 HR time frame (this is what I was waiting for)
The rejection of the ABCDE on the 1 min TF
I will look to add to my position if we see a slight reversal with a higher low e.g. at 7825 or above.
Target : 8700
Stop : 7824 (very tight)
1 min RSI oversold criteria met with a small bounce back, entry with a very tight stop.
My conviction remains that we do not go down far from here.
- On the 1HR TF I can see RSI divergence screaming loud and clear. This is now also visible on 4HR TF.
- The small wave we are in from 8100 is a diagonal. Whilst it could be a leading diagonal, probability and the wave structure before it back that it is an ending diagonal.
- I have been writing about how the fibs of the overall wave from 9100 has been targeting 7650 for many days
- My conviction is that a drive down to the 3ks needs more air, RSI on the 1D TR is 35, not far from oversold
I will be looking to go long one more small wave down to probably 7650, but I'll go in based on price action. I could be wrong and we could go down from here, and given that I am bearish, I'll need to manage entry with a tight stop.
I'm pretty sure it will retest the diagonal down trendline again at some point but it is hard to say what the bottom will be before that. I'm just risking portfolio erosion trying to either long or short at this stage. My plan is to wait until a retest of the diagonal and then either long or short that.
Off for Easter now so not many updates over the next week or so, happy holidays if you are so inclined.
Also, as you suggest, it could also be valid within an overall bull trend if this was an ABC and these 5 waves were just the A. The magnitude you refer to is measured on a % change basis (log) rather than linear. So for example, if you were trading (C>=A) and this A was 20k down to 3k (85%), and the B took it to 10k, the C would need to be at least down to 1.5k (85%). However, whilst I would expect the magnitude to be similar and whilst C>=A is most common, this is not a rule of EWT and it is not uncommon for C<A.
Wave C can be 61.8% to 161.8% of wave A (Elliott Wave Principle).
This is a proctor guideline rather than principle, which means it usually holds true, but not always.
A = 14k (20 - 6), B (peak) = 12k therefore C (A*61.8%) = 8650 so at a minimum C should take us down to 12000-8650 = 3350.
I agree with this math, and think the structure has a high probability of being the correct one (it is my secondary scenario I have noted but not shared). Bear in mind that C is usually the aggressive wave (equivalent of 3rd wave) so is more likely to be 1, 1.214, 1.628 ext of A. I haven’t spent much time deciding between the two scenarios because for the coming period I believe they are likely to share the same targets and overall behaviour. It’s what happens after this impulsive wave down to circa 3k that determines which is the actual structure.
“When waves are larger than intermediate, the price relationship must be stated in percentage terms.”
They also discuss it later under the title of Scale.
They address your other question far better than I could by discussing market behaviour in bear vs bull market and show all of the waves (impulse and corrective) in both the bull and bear trends. Eg figure 1-37 shows the DJIA in a bear trend (impulsive down in 1973) with a corrective abc up.
My conviction is we are in a bear trend and this would see impulsive action down not corrective. This could well change to a bull trend and the wave count would then fit to my bull chart.