Background - Bitcoin has limited price history and earlier moves are so volatile and spiky that it makes it very hard to do usual technical analysis. However from my historical charts you will see that I noted Nov 2013 as major wave 3 and was expecting wave 5 to develop from Jan 2015.
Yet the price progression and the actual development of pattern call that into question and caused me to wonder if Nov 2013 high was actually the major wave 5 top. Consequently, I assumed that the bounce of the 2015 low was a retracement bounce. That might still be the case. Now that we have enough price history from that low to enable us to make a calculated guess of what this might indicate regarding future price path.
So here are the 2 possible scenarios (both indicating price weakness in the short term):
1. That the Nov 2013 was the major 5 wave top and that we have seen the bounce from Jan 2015 low as triple zigzag which upon completion will revert to downside in ongoing bear market since Nov 2013. 2. That Nov 2013 high was major wave 3 and the decline since into Jan 2015 low completed major wave 4 and since then we have developed a major wave 5 which instead of taking the usual form that of an impulsive move of 5-3-5-3-5, it has taken the form of 3-3-3-3-3 expanding ending diagonal (Megaphone) and if this proved to be the case then we have truncate wave 5 where the top fails to take out the price high of wave 3 (see detail of Truncated wave 5 in section 2.3 at my.elliottwave.com/resources/free/elliott-wave-tutorial.aspx ) screencast.com/t/8x7WowPWXs So it seems that we are in very late stage of that cycle which is likely to complete around $800 zone (see charts below). Or that we are completing 1st zigzag of intermediate wave V and could experience a pullback to $700 zone with final zigzag to follow leading into completion of this cycle (around $900 – see charts below) since Jan 2015 low.
Many have noted the rising wedge developing in the price action of Bitcoin and have attempted to draw this with variation covering different price zone and time frame. This confusion is further complicated when using Log Scale where it appear like rising wedge from the Jan 2015 low (or at best a rising channel) Vs Linear Scale showing a megaphone shaped pattern.
The important rising wedge to take note of is the one being formed from the low of 13th November 2016 and which is nearing completion with upside being capped around $800 on BitStamp.
Rising wedges in this position are topping pattern suggesting that we might have entire cycle from Jan 2015 low being completed or the one which started from 2nd August low. So even if this is not a full reversal (with final zigzag to follow) it suggests a pull back is due which could drop to around $680 -$700 area.
If this zone holds then we are likely to have one more minor zigzag to the upside to follow and which could end around $900 - $950 zone as a last get out of jail card for any longs to take protective action.
Series of charts below show the details.
Warning: This is my interpretation of price action using TA approach that I consider helps me the most but could be completely wrong. Therefore as always, do your own analysis for your trade requirement and ignore my views.
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Thank you for taking the time to read my analysis.
DanV
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Whilst the minor wedge described in in the main chart proved to be the leading diagonal rather than ending diagonal hence the recent strong move up to new high for the cycle, it does not alter overall larger picture in that we are still in major 5th wave in the form of megaphone which is now becoming more distinct. Therefore in the current leg we might have some room and could higher level, it might complete the entire cycle or the 1st lager zizgag with pull back and 2nd zigzag to follow before completion of the larger 5th wave. Megaphone are very volatile and could end very abruptly. Here is the updated chart
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Provided you overlook the fact that I thought the rising wedge was actually the completion of the cycle but it turned out it was start of the leg of the zigzag of final wave of the cycle.
This now seems like it is completed. I gave the heading will BTC offer free get out jail card. This will be the case if we hold above 700 but ideally above 800 in which case we might get another bounce which could retest 1000 zone or even make new ATH. But that cannot be counted upon of the cycle has already completed. If it has then we have long period of bearish cycle ahead of us which is not most wish to hear and so it is just my own view based on my interpretation. It can be totally wrong as I have always said. But if the broader picture plays out then actual levels I suggest in my charts are less important in order to focus on the overall theme.
Here is the update chart which I shared earlier.
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Here is a different version of the chart. See the ADX (Brown) appears to be topping out at usual topping level along with Stochastic having topped with very tight coiling. That suggest that the trend in existence prior to that has now likely ended and we could see very deep retracement or new bearish cycle in development.
Update – 11th Feb 2017: From the Jan 2017 high the anticipated drop only formed a zigzag decline rather than falling wedge (5 wave). Since it which it has continued to retrace to $1080 zone being 78.6% fib retracement to the upside and has sold off strongly to $936 on Finex which is likely to be a new bearish cycle.
From $936 the price action accompanied by lower volume taking much longer that looks corrective. This retracement bounce might make it to $1000 which might be potential resistance as round number. If correct, the downside could be retesting the last low around $700 or form new lower low. I risk being laughed at as there are many who keep asking what will make me admit that I am wrong. Well right or wrong here are the charts.
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BTW - as per the chart title, that Feb high might have bee the get out of jail card. Any longs should carefully review their risk.
What if since the beginning of 2015 till Jun 2016 we had wave 1 of 5 and now we are in 2 of 5?
rafbie
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@rafalbielenia, we will drop to around $480 again and then wave 3 = new all time highs.
DanV
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@rafalbielenia, That might be a possibility. However if that was the case then we do not have clear impulsive 5 wave structure. Every leg from there appears to be of 3 swings up and down right up to current price level. Only way this might be possible is if we have a leading diagonal in the form of rising wedge. But looking at the volume and momentum indicators the technicals look very weak. Consequently having a hard time in considering that possibility at present. If the price leads us yo review this then sure I will reconsider. Thankyou for your comments.
rafbie
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No problems, thanks for your analysis as well :-)
Let's focus further.
Wave that started in May 2016 and finished in June is clearly impulsive. I wold say it would be 5 of 1 of 5 no doubt.
Consolidation between November 2015 and May 2016 is a triangle. Triangles usually happen in wave B or 4. That might be 4 before final 5.
Wave between August 2015 and November 2015 looks weird but it can surely be called impulsive. Let's assume its 3 of 1 of 5.
So far everything works well - 3, 4, 5.
The only problem is with wave between January 2015 and July 2015. If it's impulsive then that is wave 1 of 1 of 5.
Is this wave impulsive? I don't know. It can be so if you insist.
Just a stream of thoughts.
Either we resume bear market now or finish wave 2 and start a huge bull market.
I think Bitcoin market matured, gained traction, interest from Wall Street, etc. over the past 3 years and bear market is highly unlikely.
Bear market in bonds is just starting, US stocks are in 9-years bull market and in wave 5. Some sort of financial crisis will hit over the next few years (maybe even 2017?).
Given all this background I would say we had first impulse of 5 between 2015 and June 2016. But this might be my wishful thinking, I agree.
We will see.
DanV
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@rafalbielenia, Well I appreciate your reasoning. However the problem you highlighted with the move of the Jan 2015 low to July would have to qualify as 5 wave impulse in traditional way thought many have ignored that when they have labelled it as a wave 1. Here is that part of the price action - I have never been able to could that as 5 wave Cycle in any of the swings
Rather that it is clear even to non EW Practitioner that whole of that is areas consist of 3 swings both up and down. Therefore move of the low in 3 swings in this can only be counted as impulse is it is a part of a structure that forms a leading or ending diagonal of 3-3-3-3-3 structure.
If it is a part of 3-3-3-3-3 structure, then it stands to reason that over swing following it higher would also be of 3 wave structure which simply means a zigzag or double zigzag made up of abc or wxy respectively, Therefore the seeming look of impulse price action in some area is just waves a or c which would be impulsive. I does not mean that the entire move can be counted as 1-5 but rather just 3 wings abc for example.
I have attempted to show these 3 swings as part of diagonal which could be complete with recent spike into $800 or that the move of the 1st Aug low is on the 1st part of the wave (v) zigzag and which might have pull back to 700 area and go up to make 2nd zigzag of wave (v) on my chart -
Therefore it is clear to me that this is a 5 wave move of the Jan 2015 low but one that is of 3-3-3-3-3 structure which can only be either leading or ending. That is the real question. If leading then yeas we could do on to probably achieving a new ATH if it is an ending then this would be a truncated major wave 5 of the entire move since its inception.
I hope this at least explains my reasoning even if you disagree with it.
DanV
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Alternately we have triple zigzag of the Jan 2015 low and that would suggest a corrective move retracing the decline from Nov 2013 to Jan 2015 and part of ongoing bearish cycle as show in this chart
theshamik
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Hi DAN its may 2018 any update please
albertho
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It's May any updates?
DanV
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@albertho, Hi, the price has gone way above what I originally anticipated and even above my subsequent updates. Though we did have a strong drop after making a new high above Nov 2013, it has not fully reversed. So I would understand if any feel that my analysis is way out on this. However, what I am saying is that on arithmetic scale we had what appear to be megaphone pattern. This is still likely the case and in megaphone pattern the last leg is very unpredictable. This megaphone patter now seems to look less clear and more likely a triple zigzag. In log scale though it looks more like a rising wedge, see charts below.
Consequently, March 2017 high did not prove to be completion of the cycle and in fact we have new high.
So from this stand point there are 2 possibilities.
(1) The March high did complete the cycle and dropped in what I think is a 5 wave decline in the form of leading diagonal (of 3-3-3-3-3 structure). If this is the case then we have bounce in a zigzag to present high which is higher than March high, so it is likely to be a wave B of expanded flat with wave C decline to follow.
Or
(2) the drop from March high was not a leading diagonal and rather just a double zigzag, and under this scenario we are now close to completing the entire cycle from Jan 2015 low.
The conclusion would be that the upside is limited in either of the above cases and we should revert to the downside even if it is only proves to be a retracement. Likely downside could to $750 area as a modest target.
Here are the 2 charts:
Arithmetic scale with megaphone pattern
If we are forming Wave B top in expanded flat referred to above