BTCUSD - A new 5 wave impulse or another ABC correction?

BITFINEX:BTCUSD   Bitcoin / U.S. Dollar
If you were following an earlier post you would have seen that my conviction was that we were heading to 8.2k to complete the Y leg of the corrective structure down from 11.5k. BTC had different plans and put in a very lacklustre ABCDE triangle corrective pattern, going only slightly lower than the W wave. This means we have not even corrected to the 0.5 Fib level of the 5 waves up from 6k. This is a positive signal for the bulls and points to potential strength ahead.

Moving forward, I see two main scenarios unfolding:

1) We are posting a new (X) wave and will come down for another ABC corrective structure, which will likely target 8.2k or lower

2) We are now in the 1st wave on a new 5 wave impulse up

The bulls will take heart from an inverse H&S that could form if we see a pull back from 10.4k to around 9.9k (grey dashed line). The target of this would be 11.6k. There is a monster H&S formation which would be activated at around 11.5k (black dashed line) and which would target 18k.

The bears will be looking for the long term downward trend line (pink) to bat BTC back down, as it recently did at 11.8k. However, if this line is breached and maintained, it could well signal the end of the bear run.

My plan
For my trading plan it is important that I see the structure unfold into something I can understand and set clear targets and stops. Over the past 24 hours I have moved from targeting a low 8.2k to now heading North. It's important to watch what the market is doing and adjust ones convictions. Given the weakness of the last corrective structure, my conviction is that the bulls are going to gain control. I could be wrong and we could still be heading South. I therefore want to buy back in what I sold at 11.5k but do it in a way which manages risk and has clear short term targets and stop losses.

I will be looking to enter a long trade if I see a pull back and then reversal at around 0.5 fib (9850) of this smaller leg up from 9350. If this happens in the next couple of hours it would invalidate my idea and I would not enter. The target would be 11.8k but would have the option of running for longer. Stop loss would be just under the (e) of the last corrective structure at 9350 as this would invalidate the new 5 wave impulse structure and would suggest a new ABC correction is in play. Risk ratio 4:1.

Comment: I'm still holding out for a retrace. It may not come. If it doesn't the risk reward doesn't work for me on this trade and I will not be entering.
Comment: BTC did not want to oblige. If we are in a new five waves, that little pull back was very small, not even getting to 0.216. Another very bullish signal. The 1.618 ext on this minor wave 1 is 11k. We will therefore soon be approaching the long term trend line down at around 10.8k.

I have plotted on the chart 5 minor impulse waves (ending 11.8k) within a major 5 wave impulse that ends 14.25k. We could also still be in a corrective sequence, posting a new X leg that will then take us into another ABC/WXY down so it is important to manage risk with any new trade.

The set up I am now looking for is to complete this 1st set of 5 minor waves up, probably for a double top a 11.8k. I'll then wait for major wave 2 to complete and enter there. A nice set up would be to see major wave 2 bounce off the long term down trend line, turning it from resistance to confirmed support.

Patience is key here. This is likely to take 4-5 days to unfold.

The other earlier entry would be to wait for the minor wave 4 pull back. Depending upon how price action unfolds and the length of minor wave 3, this might be viable. However, with my current price plots, the risk reward for this trade does not work for my plan.


Rejected at the downtrend line but I expect another shot at it soon. I've adjusted my wave count:

(1) Changing the final C leg to a more simplistic abc rather than abcde triangle.
(2) Starting this new impulse wave earlier. The old one may still be valid but this feels cleaner. It means we are still in the 3rd wave.

Your downtrend on this chart is strange. The run of 2/20 pierced the downtrend line, then fell back. Trend line should be around 10500, which has already been broken. Thank you for the analysis!
monkia crypto_higgi
@crypto_higgi, thanks for your comment. Yes you could be right. The trend line I have shown is from 17 Dec through the 20 Feb. The other trend line option you refer to is from 17 Dec through 7 Jan. I've gone with the first because it is a more recent data point, but I recognise the latter could also be right. This is part of the problem of relying on such long trend lines with only a two or three data points. I suspect we will see price action around both points and indeed the reason for the pump this morning could have been because we breached it. I'll add both to my future charts.
@monkia, well, we will find out soon either way. I agree, there are not enough touches to have any confidence. Now I am redrawing with both, and yep, there are multiple reasons to see action at both anyway. Thanks again for the charting.
@monkia, well, your downtrend and the 618 converged perfectly and rejected, so I guess it does not matter!! Good call.
monkia crypto_higgi
@crypto_higgi, thanks. I'm keeping the log line on the chart just in case it acts as resistance and/or lines up with other key areas.
HI, good post. In this instance, the break of EMA 200 4H over 10,400 would confirm the start of a new uptrend and not just a rebound? Tks
monkia gusccbb
@gusccbb, yes it probably would. But do you think it might lag behind quite a bit and mean you miss a good entry point that is signalled by other more responsive indicators?
gusccbb monkia
@monkia,Waiting for a setback to enter. I think it's going up. I hope I'm not mistaken this time. I had a bad experience lately. It seems he woke up.
Home Stock Screener Forex Screener Crypto Screener Economic Calendar How It Works Chart Features Pricing Refer a friend House Rules Help Center Website & Broker Solutions Widgets Charting Solutions Lightweight Charting Library Blog & News Twitter
Profile Profile Settings Account and Billing Referred friends Coins My Support Tickets Help Center Ideas Published Followers Following Private Messages Chat Sign Out