CryptoCow

Bitcoin and the Triangle of Death

BITSTAMP:BTCUSD   Bitcoin / U.S. Dollar
This is just one of several possible long-term scenarios for BTC .

I'm not implying it will definitely play out like this, but it is a possibility we should keep an eye on.

So if this plays out, we should go down to around 7,1k (point D), then move up to around 8,9k (point E), and then continue down again to the downside of the triangle, and from there drop down really hard.

A symmetrical triangle can also break to the upside, but if it plays out like drawn on my chart, the probability of a breakdown will be much higher. If we do break down, we will see some vicious selling, that could get ugly really fast.

From an Elliott wave perspective, the triangle would form a large wave B in an ABC correction, with the 5-wave-structure before it being wave A.

One problem I see is that wave 4 (of A) is overlapping wave 1, which is not allowed in Elliott wave theory. However, the end of wave 1 was just a large wick, so if we can ignore it or not, is debatable.

So what am I gonna do?

First of all, I will wait if this triangle continues to play out like on my chart, or not.
If it does, then I will watch if we turn around when we reach point E. If we do, I will sell all my BTC (and probably all of my alts, too).

In addition, if we break down from the triangle, I will short the hell out of our good ol' friend Bitcoin .

What could be the downside targets?

1.) If wave C would have the same length as wave A (which is typical), that would bring us to under -4,000$. Yes, minus... so that is not a very likely target :)

2.) If we assume an 0.618 extension instead, that would bring us to the 400-500$ range.

3.) If we forget about Elliott , and just use the standard method of determining a target for a triangle, that would bring us to around 2,000$.

I still have my doubts if this triangle will play out, but as I said, we need to keep an eye on it.

A sustained break above the upper side of the triangle would invalidate this analysis.




Comment: If you find this post helpful or at least worth reading, please hit the Like button. Thanks.
Comment: Well it's becoming more and more likely with each day, that this triangle will play out.
Comment: Now it's getting really interesting.

Let's see if the triangle can offer some support at the 7k range.

If it does, I will go long from there.
Comment: We are only about 100 points or 1% away from the downside of the triangle.

Let's see what happens, when we get there.
Comment: We are moving in some kind of a downtrend channel, which will cross the downside of the triangle in 1-2 days.

Comment: It looks like the drop to the triangle will coincide with the daily RSI touching or dropping below 30.

Historically, we always got a strong reaction once that happened - but nothing is guaranteed, of course.

Comment: Prepare for impact!

Comment: We have arrived at the target!


Unleash the bulls!

Mind you, we might still touch the triangle or drop below it a few more times, but hopefully see a real bounce very soon.
Trade closed: target reached: Well, well, well.

If that wasn't a precision landing, then I don't know what is.

It is still possible that we will retest the bottom of triangle again, but at the moment we're looking good.
Comment: We are obviously at a very critical point now.

Has my triangle been invalidated?

Yes and no.
We clearly fell below it, but technically it would only get invalidated if we fell below point B, which is around the 6,450$ region (red horizontal line on screenshot):


We are at a decision point here. The fact we're not really moving anywhere for over 2 days now tells us that most people are on the sidelines, waiting to see what will happen.
Comment: Triangle broken.

Now we are in God's hands, lol.

Comments

agreed:

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HI, how you find 500$ end of wave C ? because wave A made 70% so if wave C made same thing we go to 3000-1500$ if wave C begin between 10000-8000$
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CryptoCow majic92
@majic92, Hi, I simply used the Fibonacci extension tool, and that gave that target for the 0.618 extension.
But thinking about it, you are absolutely right, this can't be right. If I use the percentage box for a 1:1 extension from point E I get a result of around 2,500$.
Strange, the Fib-extension tool normally works well for determining upside targets - is it not working the same way to the downside?
Reply
CryptoCow majic92
@majic92, it looks like the Fib extension tool is using absolute numbers, and not percentages. I'm not sure if this is how it should behave?
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Thanks for your chart and sharing your ideas. I have a similar view with a slightly different count however points in the same direction. Good luck trading.

Weekly chart:


Daily chart preferred count:


Daily chart alternate count:

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@tuamen, Hello, excellent analysis! There's just one thing that confuses me: why have you labeled your huge wave A with abc? It should be a 5 wave structure, just like the big C you have drawn.
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tuamen CryptoCow
@CryptoCow, I can't count a valid five wave impulse as wave 4 overlaps wave 1.
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@tuamen, but to call an ABC an A wave is just as invalid. So what's the solution?
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tuamen CryptoCow
@CryptoCow, why is an abc invalid? My approach is always try to count a five wave impulsive count first because they are much easier to count; if I can't get a proper five wave count then that leaves a three wave corrective structure. By the way, thank you for your kind comments.
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@tuamen, In an ABC correction, waves A and C are motive waves, and B is a corrective wave. That means that A and C must have a 5 wave structure (they move in direction of the trend), while B has a 3 wave structure. You cannot just change this important rule, because something is diffcult to count.
Yes, I mentioned that 4 overlapping 1 is a problem, altough it is just a large wick that's causing the overlap. But what you are doing is replacing one problem with an even bigger one.
So maybe there is a third way to count this, what we haven't tought about.

One possibility I see is that the Feb 6th low was just the end of wave 3 (of A), wave 4 being the rally to 11k, and then the drop to 6,5k a truncated wave 5.
But I'm also not 100% convinced on that.
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