ronfkingswanson
Long

A study of inner channel harmonic reflections projecting a rally

BTCE:BTCUSD   Bitcoin / Dollar
385 3 0
UPDATE 4/21 -- clearly we have had no strong impulse from china this monday, and since Chinese exchanges (huobi, okcoin) have been the leaders on every single motion in this series, there can be no breakout above the triangle unless and until they show up with one, and the western markets follow. I've posted a chart with this "red" 200% reflection shown below in the comments. Also realized there was a bank holiday at play in this sideways period as well.
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This is the third study I did, starting from a fresh chart and using completely different methods to approach the question of how to project a scenario where the current series of very periodic rallies continued past a dominant descending triangle that most people consider to be too strong to breach. (see others linked below)

This simple pitchfork is not being anchored on a previous price point, and so should simply be considered a set of channels that clearly frame the trend. I'm also only showing channels for 50%, 100%, and 150%, and not the other fractional fib levels.

I have a personal interpretation (inspired by DrewR) of how price bounces around inside these pitchfork channels that I've developed after charting many of these series, and I'm sure it's completely heretical, as I did not learn it from any traditional source of TA. So don't expect me to say anything here that conforms to the typical analysis of channel motion. Also, despite the numbers and the wave-looking lines, this is *not* an Elliot Wave count analysis. I have no idea how EW works.

I find in any strong channel trend that the price will bounce off the channel boundaries much like the way that sound waves reflect off the inside of a tube when resonating. In the case of the pitchfork, that means multiple waves of varying size often crossing each other, but frequently in a series of at least 3 reflections if the channel is going to hold. So a touch on one side of the 100% channel will result, eventually in a cross of the median and a touch of the opposite 100% channel boundary, then eventually crossing back to touch the original side before "completing" the channel and breaking out.

A corollary to this is the idea that "time spent" on one side of the median, say riding the upper 50% channel up the trend, must be balanced with a similar amount of "time spent" on the other side of the median in the opposite 50% channel.

Now in the case of my projections of the breach of the strong bear triangle top, when I started connecting the harmonic reflections, I quickly noticed that the peak touch of the 150% purple boundary at 544 was eventually answered with a touch on the opposite 150% (almost twice, but the second touch wouldn't count as the third reflection, as it needs to swing to the opposite side.) While the other 100% (blue) and 50% (green) channels had already completed at least 3 reflections, this final purple series, when projected into the future at a similar angle, happened to intersect the crucial $690-720 reversal zone from my previous studies. It's also possible a pending rally could reflect and pullback from a touch on the 50% or 100% boundaries on the way up to complete the third reflection on the 150%.

Once again, this entire projection is based on the successful breach of the bearish triangle around the $530 zone. Without an initial rally to break that trend, the rest of this projection is likely useless, as we would probably fall hard back to the low 400s. But if we do break upwards, the resulting psychological shift in the market at seeing the break of a 4-months long dominant bear market in Bitcoin would provide the fuel for the bulls to make such a high rally possible.
The channel ranges posted about from 50-150% would seem to show our sideways movement has already broken this trend. But there is one more harmonic reflection on the 200% channel that could happen, and it's my "Alamo" point in this projection. Last chance for a rebound, otherwise this entire trend channel is over. I had originally ignored the outer 200% channel because the touch that happened there was on a momentary freak spike, and only on the BTC-e exchange, but it was a notable one that I actually caught with some of my limit sell orders. Despite shooting up the asks, it stopped precisely at the bearish triangle boundary. So the last possible harmonic move in this series, which are extremely close to reaching, is a reflection on the lower 200% channel boundary. Breaking down would be clear failure. But looking at the RSI position, we are actually well poised for a rebound. So I've added one more "red" harmonic reflection series.
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Can't believe I forgot to account for this: Bitstamp has been on an extended bank holiday for four days, meaning no bank transfers in or out. Now look at that timeframe compared to the timing of my last "Alamo" reflection point. Pretty much explains the sideways, and also hints at what large market movers want before starting another pump rally: fresh cash in nervous hands, ready to panic buy.
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pressing play now results in a hilarious flat plateau underneath my projected reflection. :P
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