So Bitcoin has again started to pull-back, having already completed a -20% correction from Sunday's Top (and current All Time High), catching again many traders off-guard. It's not long ago (January 06) that I posted a cross-study comparing the current rise to the Parabolic rise of the previous Cycle (2017):
Three days later, BTC initiated the most aggressive correction since the March bottom (completed at -30%) so that came right on time to offer a framework to traders on how to formulate their strategy. As you see from that chart right above, during the 2017 Parabolic Rise, we had a -30% correction 4 times and 1 time the price dropped by -40%. It is important to note that on the 1D time-frame (both charts displayed in this study are on that time-frame), the 1D MA200 (orange trend-line) was never made contact with, 2 times the 1D MA50 (blue line) initiated a rebound, while the 1D MA100 (green line) kick-started a rise 3 times (so naturally the MA50 didn't hold 3 times).
So back to the present day and Cycle, Bitcoin has already completed a -20% correction as discussed. A similar correction was made back in late August 2020, so so far within a 6 month horizon, we have two -20% corrections and one -30%. That seems to be quite natural for BTCUSD. A -30% drop from Sunday's All Time High (ATH) will be around $40000, while a -40% around $35000. Both would made perfect contact with the 1D MA50 and 1D MA100 respectively.
** A Pitchfan approach ** The new dynamic that I want to bring forward in this study though, is the element of the Pitchfan. By applying this approach, we can see that every Higher High (red arrows) has been rejected perfectly on its upper bands or the median. It resembles and has many aspects of a Megaphone, a pattern that I have used extensively in recent months to project Bitcoin's price action.
As the same time the lower bands as well as the median (red line) have also successfully provided Support when needed. A moderate projection shows that the median (red line) within 2-3 weeks time, can again provide Support, this time making contact with the 1D MA100 (green trend-line). The dotted lines are the 0.5 levels and have been supporting since November 10, 2020. A contact with the lower 0.5 band will be a -40% correction, which as mentioned only happened once during the 2017 Parabolic Run.
** The LMACD and RSI ** At the same time it is useful to keep track of the LMACD and RSI indicators. The LMACD just formed a Bearish Cross and as you see on the chart, every such prior formation not only came shortly after a Top but was also a Higher High on the Pitchfan. The RSI got rejected just before entering its multi-month Sell Zone (Resistance) and is fast approaching its Buy Zone (Support). Notice how every hit on the RSI Buy Zone has been a Bottom. Keep that in mind.
I hope all the above info puts things into perspective again and offer you a "no panic/ plan the dips accordingly" framework. We still have the better part of this Bull Cycle ahead of us, don't miss out on opportunities because of fear and timely plan your buys.
Was that helpful? Which level are you personally waiting to enter again? Feel free to share your work and let me know in the comments section!
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@TradingShot - Always good to see your posts... Do you remember the study you did on the last Bull Run in which you did the Fib Retracements from the bottom, the "Real" Bottom, which I think was like $162 on Bitstamp and something like $190 on Bitfinex? Do you remember that you demonstrated that we basically fell from a new ATH to somewhere near the .382 Retracement pretty much every time? (Of course, you have to run the Fibs from the Bottom-Bottom all the way to the most recent ATH. Do you think it is worth showing this again for this current Bull Run? If anything, I imagine it would be highly educational for the newbies :D Thanks for all you do!
ntwan
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Is a greater liquidity crisis brewing that would make bitcoin TA irrelevant?
Could this be a top and could we see a stock market crash in the new few weeks? A march 2020 repeat is not impossible imo and maybe bitcoin is the canary in the coal mine.
cryptobullethbtcxlm
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@ntwan, yeah i havse similar worries... im long term bullish on anything crypto but with a stock market crash being imminent at this point (imo) we might see a big pull back on BTC aswell, however not as bad as the stock market... stonks will crash harder than btc and btc will recover faster... so if that happens we will see a massive parabolic run on btc, so i wouldnt mind... im iun it for the long run... but thats all speculation, for this week 42K levels are imminent and healthy...
PaperUpbro
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@ntwan, I share the same sentiment; I thing bitcoin is front running the stock market crash to come.
RoldElthe
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@ntwan, hope the crash happens. That why it is good to be taking proftis to buy on good pullbacks.