BTCUSD - Elliott Wave Analysis - Wave C of IV - Possibilities

BITSTAMP:BTCUSD   Bitcoin / U.S. Dollar
Woohoo, what a ride! Hope everyone is having fun, getting some trades going your way, or staying on the side lines (That's where I am mostly).

If the Wave B of IV high at 2938 holds, here are 3 possible scenarios for how Wave C plays out. Surprise, surprise, or not, these scenarios were expressed in a prior Elliott Wave forecast I wrote, back near the beginning of Wave IV.

Because the Wave II decline from the late 2013 high of 1160 to the early 2015 low of 152 between was deep and steep, retracing about 87% of the initial climb, and because of Elliott Wave principle's Alternation guideline, I have been calling for a Flat for Wave IV. If you are unsure of what a Flat is, it is an initial decline, shallow (23.6%) to modest (38.2%), of the height of the wave of the same degree, in this case Wave III by my count. The initial decline to A of IV, met that perfectly. Wave A of IV is followed by a rebound to near the old high of Wave III which completes Wave B of IV. And that's where we are.

Wave C should remain shallow to modest, preferably not exceeding Wave A. Wave C sometimes extends, but normal flats are more common. For more on Corrective Waves, read this: For more on the "personalities" of waves, including A, B, and C segments, read this:

Comment: Complete the Flat in a straight forward 5 wave impulse to the same level as the initial decline to Wave A. (Time is not to scale.)

Comment: Complete Wave C of IV as a Barrier Triangle. The height of the triangle could be deeper, down to Wave A at 1880 price level, before rebounding to the flat top, back down to the rising bottom of the triangle, and back up, until the pattern completes. This could take a while, and most traders and investors get very frustrated with this pattern. Shake you out and wear you out. The height of the top barrier may be lower than that depicted.

Comment: Enter into a falling wedge. The wedge may be shallow and lateral, it should not be deeper than a 50% Fibonacci retracement level to remain within the normal alternation guidelines for a shallow correction.

Comment: The Breakdown begins. Above you note the flat top Barrier triangle scenario. BTC has recently broken below a flat bottom barrier triangle.

Comment: Wave C or IV correction really starting now.
Sell Mortimer Sell!!!
Comment: It is way too early to know how Wave C of IV will play out. Trend lines and support level must be obliterated. Hope will slowly be quelled and replaced with uncertainty.

Flats tend to complete in the vicinity of where Wave A completed. Look for a return to the 1800 to 1900 level.

If Wave A is any guideline for timing, look to the end of August or early September before Wave C completes.

Comment: With a few moves complete after the reversal at B, we can now begin to conceptualize how the next steps might play-out for BTC. This does not forecast which larger pattern might emerge, though I am leaning toward a standard 5 wave impulse down to the eventual completion of wave C of IV.

For long only traders, you''re waiting for higher probability trades, to the upside. That means waiting for the zig-zag corrections during a wave (2) or a wave (4) . These will follow the smaller degree completions of 5 wave moves downward of the smaller degree.

The timing of the trade-able future moves at this point are a swag, though the current upside correction to complete (4) in the chart below cannot progress much higher than the 2608.96 of a of (4), since wave (1) completed its downward move at 2611.39. Further, since wave (3) cannot be the shortest motive wave, wave (5) must be shorter than wave (3), since wave (1) was longer.

Comment: Updated Count: Curse you BTC! What cannot be expected, the unexpected. A failed, or truncated 5th wave. Sheesh... I'm not making this stuff up.

What's a Truncated or Failed 5th Wave? It's when the expected move falls short, sometimes not even exceeding Wave 3. Well it did that, but not much more. Here are a couple links for reference:

In any case, the A-B-C retracement has has reached the 61.8% level, while it may continue, there's not a lot of room.

If BTC does continue upward, in my opinion, it will not zoom into the next bull market, instead the correction will morph from a traditional downward impulse or motive wave, to the Flat Top Barrier Triangle. See the chart above. This "bottom" at 2400 fits that scenario perfectly.

On to today's wave count and moves...


So this ABC up probably is near completion. Might be time to get short
RogueDave TomPower
@TomPower, Yes, if you've got the ability and risk management skills to go short, it might be an opportunity. The vast majority of the AltCoins are not confirm this BTC move. RSI hasn't peaked into overbought and MACD has not crossed over into sell. But the setup is there. I prefer shorting during Wave A of a correction before the bulls get a whiff of the coming recovery, which the bounce to B certainly did. Shorting BTC during Wave C is like playing with matches around open containers of kerosene, careful that you don't get burned.
RogueDave TomPower
@TomPower, I should clarify, not this little sub-wave A, way back at the beginning, June 12-13-14. The divider Big Wave B, that launched BTC from 1880 to 2938 now marks a danger zone after which going short can be hazardous to your wealth.
+1 Reply
RogueDave TomPower
@TomPower, Ugh... What a mess. Hope you didn't short. And yeah, this unpredictability is why shorting is so dangerous until clarity about direction and patterns are resolved.
Do you know which path we'll be going with this down?
RogueDave silmaril0875
@silmaril0875, Not yet, not enough data. Wish I had a crystal ball, but I don't.
There are conflicting claims that this is the start of wave 1 of 5 vs. we are finishing up wave 4 (your analysis).

Why are you leaning towards the latter?
RogueDave qedbeech
@qedbeech, I've haven't seen any convincing arguments or posts (wave counts) that show a completion of a 5th wave and the full correction that follows it. After a 5th wave, an A-B-C correction follows that move of the same degree occurs. Said differently, wave 5 at a lower degree marks a Wave 1 at a higher degree. That higher degree Wave 1 is followed by a Wave 2 correcting it.

Again, I haven't seen any posts suggesting this. Can you provide a link to an Idea Post with this claim?

I make my case for wave 3 (or III) completing in June, and the beginning of wave 4 (IV) in the updates on this. Scroll down to the update of July 18 to see where I make my case for wave 4.

qedbeech RogueDave

Thank you for your detailed response. Love your work.

The 5th wave idea comes partially from the Goldman Sachs paper, which claimed that the last leg of wave 4 would end at 1850.

RogueDave qedbeech
@qedbeech, I've read varying accounts of interpretation of Goldman's report, but have never see the full report. GS and I disagree about the lower degree waves, based upon their chart that can be seen in this ZeroHedge post: In it, they identify the completion of a 5 wave move to complete Wave III. In that count, we agree. What follows Wave III? Wave IV.

In this article dated July 3, GS analyst, "Jafari wrote bitcoin was "still in a corrective 4th wave" that "shouldn't go much further than 1,857." There is also an updated chart.

I think some who are not familiar with Elliott Wave are interpreting the low I have designated as A, which is within the target zone identified by GS, as the full and complete correction of Wave IV. They are overly eager in my opinion. Yeah, cases can be made that an A-B-C has completed, my primary difficulties with those counts, are the Alternation guideline, as explained in my prior post with the case for wave 4 (or IV), insufficient complexity and insufficient time for a correction of this degree. The bull market of Wave III lasted 2.5 years. 2.5 years is going to be corrected in a little over a month? I don't think so. It is possible, but in my book, unlikely.
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