Oops_I_Charted

Bitcoin BTCUSD - If Wedge Breakout Fails: Bearish Wolfe Wave?

BITSTAMP:BTCUSD   Bitcoin / U.S. Dollar
This is an expansion on my recent post about the Descending Expanding Wedge breakout.

I spotted a potential Bearish Wolfe Wave while trying to figure out the next steps if the breakout fails. It was a solid breakout of the wedge , but since the stochastic is pretty high across multiple timeframes, I'm not 100% confident that it has the momentum to continue. The volume isn't quite convincing enough either.

So now we have some things to look for as signs of which way it's going to go:

Wedge Breakout

1) It bounces off the wedge boundary/1hr Ichimoku Cloud
2) Stochastic/RSI gets lower without breaking the upper wedge boundary
3) It continues upwards, with buy volume picking up

Bearish Wolfe Wave

1) It breaks back through the wedge boundary and stays below it
2) It gets lower than the previous low of about $1715
3) It breaks the wedge boundary and the stochastic hasn't bottomed out


I put a couple potential targets on the chart for each scenario.

Will update if I see anything significant!
Comment: Just noticed a couple more interesting things. Not that they strengthen either theory but I just want to point them out.

The first is that it bounced off the target for this Inverse Head & Shoulders:

Comment: The second thing is that if we breakout now with volume, or if it continues to test the top of the wedge and then breaks out with volume, it looks like it might be a Cup & Handle (the volume looks like it roughly fits the pattern), and the target for that brings us right up to just about $2000:

Comment: Interesting, it just broke above the Cup & Handle neckline, and it looks like volume is picking up...

Comment: I'm having a hard time seeing this as an entry point considering the stochastic & rsi are so high on lower timeframes (bottom row of charts) but 6hr, 12hr and 1d look good. So my feeling at the moment is that we are going to need to dip down a little bit first.




My final thoughts unless something unexpected happens:

Wait for the stochastic / rsi to get lower on the shorter timeframes, and as long as we don't break back down into that wedge, buy if it breaks that green neckline again with good volume.

I'll be back to update if something major happens.
Comment: one last note: we've got a bearish divergence here, which is probably what will send us back down very soon to recharge that rsi ;)

Comment: Not out of the woods with this Wolfe Wave yet, I refined the drawing a little to make the angles and lengths of the longer legs equal, and it turns out this is about where you'd expect it to start falling to form that final leg downwards if it was a Wolfe Wave.

Plus the RSI is very high and starting to fall - and there's a bearish divergence. We also haven't broken the volume trendline yet.

So it seems like the next few candles will make or break this pattern.

Comment: Well look at that...

Comment: Looks like a possible head & shoulders on the 5 min chart.
I still don't feel strongly enough about either scenario yet and I have to go to sleep - so I'm not going long but I'm going to set buy orders near the previous low (around $1670).

Good luck!
Comment: I'm cautiously going long here. Bounced off the 1hr ichimoku cloud, stochastic is pretty low on many timeframes, we didn't quite test the wedge boundary but got close - and it looks like it could be forming the right shoulder on a larger inverse head & shoulders. Also keeping my buy order at the previous low as I mentioned before.
Comment: The Wolfe Wave idea is invalidated btw so I feel safer.
Comment: Testing the top of the wedge again - if it breaks through convincingly I'll reduce my long and watch for lower entry points

Comment: Looks like both ideas may be invalidated - glad I reduced my position.

Broke through the wedge on Bitfinex, Bitstamp is about there right now, and it's in a new Descending Expanding Wedge.

This now looks like a Dead Cat Bounce, and I see 2 targets.

Here's the new idea:

Comment: Just updating for my records that it did turn out to be the pennant (see my other ideas) and already broke out!
So still at this point it can go either way? Too bad I sold out expecting a burst bubble, smh. Thanks for all the posts and updates!
Reply
@medic86, I think it could still go either way, but the way it bounced off the triangle here makes me think the Bearish Wolfe Wave is less likely to happen:



I think if we haven't broken back down into the wedge by an hour and a half from now the Wolfe Wave is invalidated.
Doesn't mean it won't try to test the top of the wedge though - just keep an eye out. I think going below the wedge in any case = bad news, whether it's following one of these patterns or not.
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