Good morning, traders. What a wake up call for those of us in the U.S. Bitcoin price drops $500 in the early morning. However, this isn't a surprise. During my recent live streams I spoke of the various gaps below and above price as well as price needing a retracement and that we would likely see $6800-$7200 depending on if price made one more push up before doing so or not. It did not, so price has fallen near the bottom of that range as expected. Many longs were liquidated in this process which helped price get here so fast, creating a motive wave. As expected, bears are now coming out of the woodwork in droves proclaiming that we are DEFINITELY going down to $4000 this time. Same song and dance.
Currently we are rebounding off the bottom of my 6H box, which overlaps the top of the $6800 block and is also the daily pivot. Additionally, it is the diagonal support from the November low to February low. OBV is rising on most TFs, which is what we want to see as volume precedes price. Price has hit oversold/near oversold on TFs up to the 6H. Price also dropped quickly which means traders should be looking for bullish divergences. Price is currently finding resistance at the S4 pivot and support at the S5 pivot on the 15 minute TF. If prices closes the daily below $6865, then it will have filled the CME Bitcoin futures gap that was created by last week's close and this week's opening. The next gap down, as I have been mentioning, requires a daily close at/below $6405. If this move down is subwave 2 of Wave 3, then we should expect price to retrace into the $6241-$6645 range. The lowest end of that range is the median of the sideways chop range that price went through from August 9-24th. This would potentially fill that lower gap. If it is subwave 4 of Wave 1, then our current low is likely wave A of it, which means we go up for B, and then lower for C before heading up toward $8000 for subwave 5, unless of course we get a flat correction which means the current low is as low as we go. However subwave 4 plays out, traders should be watching for a pennant, flag, descending wedge, or descending broadening wedge to form. I'm not expecting to see a pennant form because the structure for it is not ideal, nor a H&S at this time. If the latter does form, then the top of the left shoulder is August 28/29, the head is the recent high, and the right shoulder should likely top out around $7135-$7250. If an H&S plays out, then the target should be the $6420 level. The 15 minute chart shows a possible ascending triangle forming which, if breached to the topside, should see a target of the S2 pivot around $7150. Ultimately, such a move could play out as an IHS, which would see price target $7400. An IHS requires expanding volume and candle spread as price completes the right should and breaches the neck in order to be valid.
Taking a look at the Wyckoff I posted about two weeks ago on TV (www.tradingview.com/chart/NKw89GcM/), price has been following the projected movement. If it continues to do so, then we should see an overall move up toward $8200 and subsequent retrace toward the low-$7000s, followed by a strong move up toward the February high. Of course this is all speculative so traders should not be trading blindly. Trading plans, confirmation levels, and risk management are required to be successful over the long-term in financial markets. Watch for over-leveraged, under-capitalized shorts to get liquidated if price moves up quickly due to retail traders FOMOing in as price dropped earlier.
Currently we are rebounding off the bottom of my 6H box, which overlaps the top of the $6800 block and is also the daily pivot. Additionally, it is the diagonal support from the November low to February low. OBV is rising on most TFs, which is what we want to see as volume precedes price. Price has hit oversold/near oversold on TFs up to the 6H. Price also dropped quickly which means traders should be looking for bullish divergences. Price is currently finding resistance at the S4 pivot and support at the S5 pivot on the 15 minute TF. If prices closes the daily below $6865, then it will have filled the CME Bitcoin futures gap that was created by last week's close and this week's opening. The next gap down, as I have been mentioning, requires a daily close at/below $6405. If this move down is subwave 2 of Wave 3, then we should expect price to retrace into the $6241-$6645 range. The lowest end of that range is the median of the sideways chop range that price went through from August 9-24th. This would potentially fill that lower gap. If it is subwave 4 of Wave 1, then our current low is likely wave A of it, which means we go up for B, and then lower for C before heading up toward $8000 for subwave 5, unless of course we get a flat correction which means the current low is as low as we go. However subwave 4 plays out, traders should be watching for a pennant, flag, descending wedge, or descending broadening wedge to form. I'm not expecting to see a pennant form because the structure for it is not ideal, nor a H&S at this time. If the latter does form, then the top of the left shoulder is August 28/29, the head is the recent high, and the right shoulder should likely top out around $7135-$7250. If an H&S plays out, then the target should be the $6420 level. The 15 minute chart shows a possible ascending triangle forming which, if breached to the topside, should see a target of the S2 pivot around $7150. Ultimately, such a move could play out as an IHS, which would see price target $7400. An IHS requires expanding volume and candle spread as price completes the right should and breaches the neck in order to be valid.
Taking a look at the Wyckoff I posted about two weeks ago on TV (www.tradingview.com/chart/NKw89GcM/), price has been following the projected movement. If it continues to do so, then we should see an overall move up toward $8200 and subsequent retrace toward the low-$7000s, followed by a strong move up toward the February high. Of course this is all speculative so traders should not be trading blindly. Trading plans, confirmation levels, and risk management are required to be successful over the long-term in financial markets. Watch for over-leveraged, under-capitalized shorts to get liquidated if price moves up quickly due to retail traders FOMOing in as price dropped earlier.