A lot of my work consists of thinking out worse case scenarios. I pretty much look for rocks, count them, and then order the tests that overturns all the rocks. I simply act as the eternal pessimist, and let the facts prove me wrong. This way, there is already a contingency plan for the worse case scenario, and if all is well, I remain pleasantly assured.
In the case of $BTCUSD (here, I decided to look into a different exchange other than the usual where all my charts in are derived, simply to look at the same market through a different exchange), the predictive/forecasting model I use put out three "worst-case scenario" targets I would look for in your approach, as you continue to slash your way through the jungle thickets.
The targets are:
1 - TG-1 = 404.96 - 25 AUG 2014
2 - TG-2 = 386.21 - 25 AUG 2014
3 - TG-Lo = 329.42 - 25 AUG 2014
The reason I am looking at this exchange (Bitfinex vs. ) is simply that I am interested in comparing the worse-case scenarios that I have posted recently using the same predictive/forecasting model when looking at the exchange.
First, a few technical comments.
1 - The H4 level implies a impulse. The are 3 verifiable degrees in terms of wave count (whether using the standard Theory (let's call it "SEWT") or the T.S. Hennessy new technique (let's call it "NEWT") - note that the bias is reinforced by a current signal on the predictive/forecasting model.
2 - The first count at the top-left of the chart illustrates parenthesed numbers, and reflects a potential NEWT count. I say potential because a longer impulse would be able to verify its validity.
3 - Assuming that price as more space to fall, and that the current vawe-based situation puts us in the middle of a Wave-III SEWT count, then I would consider TWO potential scenarios:
-- a - ONE that would have price complete a A-B-C correction from the lower-achieved (5) point, crossing the steep overhead resistance symmetrically (see the S1 to S2 speculative projection);
-- b - ANOTHER that would have price continue its downward course along its overhead resistance line and achieve a later geometry to conclude at Point-III (Point-III is defined as a strong bias based on the model's new and future R/S levels defined in TG-1 and TG-2.
In any way, at this point, this is all speculative game theory, looking for the multifaceted ways of getting killed and thinking up ways we would have survived by devising a plot before getting killed - Sort of a future retrospection (huh?).
As explained recently to another trader, I do spend quite a lot of my time looking at internal strength of the asset, once a direction and a target is defined. This is an important part of my trading methodology, as price does have some degree of mechanical nature, and looking for the piece and parts that would give its legs to get from here to there is really limited by the available geometries that repeat themselves across all times, charts and assets.
Let's see where this leads us. Feel free to peruse through the "Links To Related Ideas" for recent and older BTCUSD charts where this predictive/forecasting method has been applied quick satisfactorily.
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There are several geometries worth considering at this juncture:
1 - Price has posted a series of internal-within-internal waves, in which the beginning of a 5-wave system remains incomplete. As this occurred within the beginning of a 3rd wave impulse, this would likely respond to the Elliott Wave's 3rd wave extension condition.
2 - Assuming that the current wave development is the most probable type of extension (this current downward impulse maintained a normal wave 1 and 2, but developed a protracted, disproportionate 3rd wave impulse, making it a good contender for a 3rd wave extension), then a redundant geometry is called for at this point, where Elliott Wave Principle suggests that in the case of a 3rd wave extension:
Wave-1 = Wave-5.
For this rule to hold true, then we would need to see the following price action:
1 - The current TG-Lo remains a structural low, not to be surpassed;
2 - A more COMPLEX corrective rally would occur at this point, so as to also answer to Elliott Wave's Rule of Alternations, where a simple ZZ in Wave-2 would be accompanied by a more complex zig-zag ("ZZ") alternative, such as a double-ZZ or a triple-ZZ;
3 - A Wave-5 development that would spare the termination point of Wave-3, whichi would make it a TRUNCATED 5th wave and leave TG-Lo intact.
Above conditions are based on the assumption that TG-Lo defines a solid reversal level.
REVERSAL TO A LESSER-DEGREE POINT-4 LEVEL:
In order to evaluate a potenital reversal level for Wave-4 at the highest degree defined in the chart, one needs to seek a one-degree down 4th wave termination point, which is approximated at about 443.00. Here again, this is defined based on a solid reversal ground defined by TG-Lo.
As explained earlier, failure of TG-Lo to hold price at any significant levels would require analyzing price action at the daily and weekly levels while remaining cash, as this would suggest that larger institutional players are interfering with lower timeframes.
$BTCUSD in #bitfinex hit 329.42 target defined last August:
via @tradingview | $BTC $USD #bitcoin #litecoin
In the interim, several targets have been refined. The refinements were not offered based on changes within the model, since the model remains a non-variable here. The interim changes were made out of M15, H1, and daily predictive analyses.
As you may recall, this model is best calibrated for H4 charts.
For instance, in the following chart (DAILY), a TG-Lo was defined in the daily timeframe and brought into a H4. However, while this remains a lower target, I would caution the trader by repeating that the predictive/forecasting model "sees" best in H4 environment. In a finer granular frame such as M5, M15, and H1, more proximal targets might result, whereas coarser frames such as H8, daily and weekly levels might cause targets to be defined more distal to what a H4 might find.
A prudent method here would be to define a trading signal (or "trigger" as I have recently introduced) from a TG-Lo/Hi defined from a lower timeframe, then define a "Worse-Case Scenario" from a higher timeframe. These two values would represent a reasonable, but widest range in which price might turn. Within this range, a TG-Lo/Hi from the H4 would continue to represent the "best case scenario", so to speak.
All this is so that you do not get confused with the predictive analyses and forecasts that have resulted from recent M15, H1 and daily frames.
The original H4 was the "best case scenario" that the model could offer as a low-probability attainment level and high-probability reversal levels. For those not familiar with this defined target, it simply means that a non-numerical target (i.e.: one that does not carry a number such as TG-1, TG-2, TG-3, ...) will be very difficult for price to reach it, hence impose a low-probabilitof getting reached. However, IF and once price reaches that target as it moves in a sustained bearish swing (to reach a TG-Lo), or a bullish swing (to reach a TG-Hi), then a significant repulsion would ensue, so as to reverse price.
Reversal was defined as price carving a new structural level (i.e.: a lower low when repulsed from a TG-Hi, or higher-highs from being repulsed from a TG-Lo), or simply retracing to depths greater than 0.618-Fibonacci range. Such targets are qualified as "Hi" or "Lo" to denote their bearish or bullish position relative to the present price level at the time of the predictive analysis/forecasting, respectively.
In contrast, a target associated with a number, such as TG-1, TG-2, TG-3, represents a level at which price is expected to mull, consolidate or perhaps retrace to a range between 0.382 and 0.618. You will notice that if and once these occur, they will define FUTURE pivot levels, and are NOT associated with prior pivot levels (as a trader had once inquired), although their reaction to a former pivot level would be coincidental, as price is prone to react to prior such pivots. This is most interesting when price reaches now historical highs or lows, and this TG-n level becomes revisited again, as this new pivot defined by this numerical target would become quite obvious to the pivot-seeking trader.
Finally, a quick word on the model itself. Price that is generated from the model has a direction, range and strength that is defined OUTSIDE of the price field. This method allows me to use the model on any asset (stock, indices, Forex, and in this case Bitcoin exchanges). I never intended to provide analyses for any of the bitcoin traders, since I have not, do not and might not ever hold a bitcoin account. It might sound weird to some, but at least, you will know that this also allows me to provide analyses free of fear, greed and hope, not because I hold no particular stake on this currency, but also because all targets defining highs, lows, reversals, and all data defining strength and direction are from a non-conscious, cold-blooded algorithm I refer to Predictive/Forecasting Model or "the model".
The model represents years of market studies in price, volume, time - There really nothing else to ingest, except a horde of infinite indicators that can be "discovered" or created out of the same three variables, much like hundreds of books for dietary plans when there still is nothing else but fat, carbs and protein to write about. Although I cannot reveal the content of the model, it's free and it is here not to spoon feed the novice trader. It is meant to be used as a guideline for the experienced, veteran trader who already has a habit to "plan the trade, and trade the plan".
There is nothing to buy here. But most importantly, there is nothing to become dependent upon. The model is as good as any trading plan, and it can be right, price and generate incredible calls quite often. But let me be emphatic and repetitive here: It's meant to generate ideas to compare with an already well defined trading plan by a self-sufficient, lucid trader with good risk management and money management skills, the latter two being more valuable than any robust algorithm.
Looks like this one (your fork) is just as good. Pretty cool.
1 - One at 276.87 from a DAILY chart, defined as "TG-Lo = 276.87 - 17 SEP 2014"
... AND ...
2 - ... Another one at 329.42 on the H4 chart as "TG-Lo = 329.42 - 25 AUG 2014.
As I mentioned yesterday, the H4 target is usually much more reliable than any other ones. However, those defined off of the M15 chart would tend to be occurring sooner (high-sensitivity, low-specificity) than what is defined off of the H4, whereas those defined off of the Daily chart would tend to be occurring later (low-specificity, high specificity) than what is defined off of the H4.
The following DAILY chart illustrates the one target defined at 276.87 from a predictive/forecasting model, defined as "TG-Lo = 276.87 - 17 SEP 2014" - Also mentioned was that the daily-model generated target can be used as an alternate "Worst Case Scenario".
If price were to fall below that worst case scenario within the H4 chart, then I would stick with analyzing price action off of the daily chart, since this would imply that heavier players are interfering with smaller timeframes.