DanV
Short

BitStamp - Still in Triangle wave (iv) of 3 Consolidation

BITSTAMP:BTCUSD   Bitcoin / Dollar
3817 17 24
NEUTRAL to SHORT
From my last published chart of Bitcoin             on Mgox suggested potential flat 3-3-5 correction in the position of wave (iv) of larger wave 3. You can refer to that chart here (along with Youtube video explaining what typical 3-3-5 flat correction is)

I cautiously suggested minimum downside target of 400, but pointed out that even 250 or lower would not surprise me and still would conform to wave (iv) correction in larger up trend. This is when price was still in 1000 area having bounced from low in 500 zone. Many argued with me that with low at 500 satisfied ABC correction and now that we are in new up trend. I tried to explain why that view would not be correct since the drop to 500 did not exhibit 5 wave internal in the 2nd leg down. Further the bounce did not exhibit new impulsive 5 wave up. I noted that both the drop and subsequent bounce to 100 area only had 3 swing down and 3 swings up. Hence, my expectation of 3-3-5 flat.

Without labouring, the final leg down appear to have exhibited very impulsive leg down and could well have form 5 waves down, but the following the event of MGox no more data is available, hence the final minor wave is incomplete.

BitStamp do not have the back history, however, I am carrying over the wave count from MGox to BitStamp and consider that since the High at 1160 we are in wave (iv) of 3.

It amazes me that some with rudimentary Elliottewave (EW) knowledge continue to argue about the wave labels since that 1160 high and every drop they can count 5 waves. I do not consider myself an authority but do have reasonable good grasp of the basic concept of the EW. I an struggling to place clear 5 wave counts on any of the major legs since that high.

BitStamp appears to be developing a triangle (as suppose to 3-3-5 flat in the case of MGox). This type of triangle often forms in position of wave iv. They have 5 swings labelled as a-b-c-d-e             as show in my chart and each leg could have 3 swings each making it 3-3-3-3-3 triangle.

If this interpretation is correct we are in finale leg down being my preferred count which also has nice pitchfork suggesting further downside potential. The Alternate is shown in turquoise with leg (d) as high as 865 - 870 zone before dropping for the final leg to low around 400 zone or little higher.

One reason adding further weight to this still being in congestion and not a new Impulsive move up is that so far the bounce from 25th Feb low has not exhibited impulsive 5 wave type of move to the upside.

Watching 5 min, 15 min and such time frame often looks very exiting but sadly do not dictate the larger time frame no matter how many divergences are noted. So, till I have evidence to the contrary, we are the wave (iv) Triangle correction since the 30th November 2013 high and are likely to retest the low around 400.


http://www.danv-charting.com
https://www.youtube.com/channel/UChJVIJir7nymD9J3ZWoal-w/feed
https://www.tradingview.com/chat/#E4bnOJSWcO1zDjBG
Thanks Dan, this analysis is extremely useful as someone just learning the ropes on EW and considering investing into btc.
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So far price having challenged 700 area immediately failed to hold and is now back below 650 area which on Hrly it appears making 3rd attempt. If it does not succeeds then one can only guess where it might end up. My cautious approach is that this is still a potential triangle. If correct $400 level needs to be retest and hold in order for new up trend to develop properly. However, it could make new lower low. I cannot give you reason as to why that might happen. As all of you already knows, I am novice and ignorant of this subject assets and its dynamics. But From Technical Analysis approach, I see real possibility of retest of 400 by late March or early April being approax 38.2% or the time it took for the last cycle to complete which in my view started from Mid Feb 2013 to Late November 2013. If we get retest of 400 or new low, many will fell sick and express disgust, in the process weak hands might be stopped out before new trend unfolds. Out of interest just take a look at what might develop if we fai to take out 700 zone with convincing momentum. The as I don't know the Bitcoins dynamic, dismiss it as I have no clue. Hope all the bulls are right really I mean that:) Here is the chart.
snapshot
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I have noticed that bitcoin community seems to think we had 3 major peaks so far: June 11, March 2013 and November 2013. When do you think wave 3 has started? How confident you are that November 2013 peak was not wave 5?

I understand that Elliott wave analysis is very different than "conventional wisdom", although was a bit worried (as a potential btc buyer) that community seems to view bitcoin as continuously raising so far, with 3 major peaks reached already. Your comments will be highly appreciated :)
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3 Major peaks have resulted in noticeable pull back as one would expect. The question not is whether we are likely to continue back towards single digit or 2? You can see that based on my earlier chart I have attempted to show possible counts which due to lack of historical price one cannot be absolutely sure, but looks reasonable to me. Check this chart here

If that holds then we will be in wave (iv) within larger wave 3 using the MTGox chart. Where in my subsequent charts has cautious downside target of 400 but also stated that I would not be surprise to see lower prices even 200. Well that now is history. Transferring the same to Bitstamp, we do not quite see the same action. So I am inclined to think for now we are in Triangle which if it holds we are likely to drop to 400 for retest before continuing higher. So in conclusion for now we should expect lower prices unless price action disprove that. But also even of we seems to be breaking out of the triangle it is the nature of the up trend that will give clues if it is likely to be new impulsive leg to the upside or just a bounce. But trading and investing is never one way Street so prudent money management should always be in place that would not lead you to loss all profit or indeed your investment capital. Hope it helps.
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DanV, thnx for your explanation. Besides the technical side of the story, there is some good news lately. Still think this formation will continue? I fnd it hard to combine these two because the btc community is very sensitive to news.... Gr Maarten
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I follow what you mean. Sometime they almost suggest opposite outcome. However, either the pattern could morph into some complex structure or events could fall in to correct places. So, if the EW are correctly interpreted, then it is most likely to play out. Of course we will find out good time.
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Hi Dan, great analysis, thank you for sharing. The price is now touching your orange line - what is the meaning of that line?

More generally, I would like to learn about EW. What book will you recommend? I have a background in math, could be technical one.


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Thank you for your appreciation. Here is really good resource from the folks who have contributed so much to popularising EW in recent times http://www.elliottwave.com/dvdworkbooks/
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Thanks Dan, looks very interesting
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I like technical chart analysis that drills down - my take away is the anomaly factor currently affecting Bitcoin - from your chart I see a Gartley Pattern formation that is just forming - integrated with EW - I run price formation algo - Implied Volatility probability horizon based statistical volatility/log/skew/kurtosis - compared to the 1 standard deviation out; this would concur with your argument. The 500 mark is basically the Fib retracement to bounce off of - 400 is the next - 32% Fib.
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