While Bitcoin has recently shown a big breakout, it has failed to create new highs. In this analysis, we explore the bearish evidence for bitcoin suggested by technical analysis.
Analysis
- The first thing we spot is a clear bearish divergence on the 4H chart - We see the formation of higher highs on the price, and lower highs on the indicators - The Relative Strength Index (RSI) shows weakened strength as it creates lower highs - The Moving Average Convergence Divergence (MACD) also shows decreasing bullish histograms, and a potential death cross in play - We have seen strong support and resistance zones between the 0.236 and 0.382 Fibonacci zones - For a bearish trend confirmation, it's important that we break and close below the 0.382 Fibonacci support - Based on Elliott Wave counts, we can see a clear Impulse Wave (12345) count that has ended - It's also important to note that on a larger trend, it's the first time in days since we have created a lower high
Market Sentiment:
Long short ratios are at 73 to 27, with even more longs than shorts. The amount of long positions are increasing dramatically, with dominant bullish sentiment in the market due to the overall bullish trend.
What We Believe
We believe that a short term corrective wave might be in play, based on not only the bearish divergence, but also elliott wave counts suggesting the end of an impulse wave. However, a break of the resistance levels to the formation of new highs would negate this scenario.
the book "natures law" written by R.N elliot... states that there is an order to the market that be understood and figured out. from above a river looks to have order. meandering to and fro. but that is turbulence and extreme pressure created by the chaos of rushing water. Trying to find order in the markets is like trying to find water with a divining rod. the problem with elliot waves and the people who offer services based on it. is that they always can come up with alternate counts that explain everything... in hindsight. it does little good for dealing with the future
XForceGlobal
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@Gunslinger2005, That's very insightful. Thanks for sharing that quote. We do agree up to a certain point; counting waves isn't, and can't be the end-all and be-all. However, as traders, we trade based on probabilities. While there are numerous ways to count waves with the same chart, we explore all possible cases, and stick with one count that makes most sense. Adjustments to the wave counts may appear as hindsight from one perspective, but from another perspective, it also means adjustments are made to increase the probability of getting the right wave count, just as one would adjust trend lines as they gather more price data.
Once again, thank you for your comment and contribution.