monkia
Short

Part 3: The Elliot Wave road to $3k or $20k+

BITFINEX:BTCUSD   Bitcoin / U.S. Dollar
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If you have been following my earlier posts part 1 and part 2, you will see BTC has performed pretty much as expected since my initial post almost a month ago (the exact chart is shown above). I see two potential paths, the 3k or less (posted above) and the 20k or more (posted below), however I am biased to the 3k scenario and trading against that until at least the long term diagonal trend line is broken.

I was able to short on the way down to 7.3k. From 7.3k I had anticipated the pull back to 9-9.5k but unfortunately missed my short entry because I expected it to take longer and test (touch) the linear long term diagonal trend line (purple) formed from the 20k high. I even entered some short term buys anticipating an uptick but exited out a nil profit on those trades. I have since been waiting patiently to get my short entry. In this time I have been reviewing the 2014 action and the key price action points for this drop since Dec. It seems to me that with the exception of one point, BTC is respecting a the long term diagonal trend on a log basis. I had been looking at the log line, but using the 5 March 11.7k peak with this. The chart below shows how it has been respecting an different trend line (touching and rejecting it 5 times).



Looking at the 2014 correction, it ended up breaking the trendline after a prolonged 3 weeks of sideways trading.



It would not be unreasonable to expect the same to need to happen this time, which reinforces my view that another drive down is required. However, it could break through this and head up and therefore placing the stop on any short trade will be important.

My conviction is that BTC is in the Super 5th wave down from the 11.7k test of the trendline (purple) and has completed wave i and wave ii and is now in wave iii with a target of around $3k. The current pull back is the retrace from the minor wave 1 within the larger wave iii .

I am looking for an ABC retrace formation to enter a short trade and would like to see this test the log diagonal trend line . This would see it reaching out to around 7.4-7.86, pulling back slightly and then driving up to the trend line (around 7.8-8.2k depending on timing). I'll manually manage the stop and will probably have it tight because if the trend line is broken my plan is invalidated and we could see a sudden drive up. I would then potentially look to reenter a short at the 9k area or let this break and start to think about going long.

Entry: To be confirmed based on ABC , but approximately 7.8-8.2k
Target: 3k
Stop: Tight, manually managed

Entry set up


Bull scenario from 1 month ago


Potential different bull scenario:
Comment: The retrace was more aggressive than I expected. I'm sticking to my plan and looking for a 335 ABC, which would see this C wave retrace to 7900 (1.272) to 8350 (1.618). The log diagonal trend line is also in play here. I will be looking for signals around these areas to go short.

p.s. still on vacation so less frequent updates for a few more days.

Comment: BTC is making really slow progress. If it continues to make slow, alternating progress over the next 7-10 days, this will be very similar to the 3 weeks of sideways trading in 2014 prior to a break up through the long term diagonal trend. BTC increased by 75% in this period.

For shorting, what I ideally want to see is a strong impulse up over the next 2-5 days to challenge that trend line at around 7800.

Comment: I'll look to enter a short if the E wave is formed. I may also consider a less leveraged short on a breakdown of the triangle without the E fully forming.

Comment: I ideally do want it to break these two up trendlines, but particularly the lower one, before getting to 7k so I can short.

Comment: Although it briefly hit the 7k and broke the trendline I didnt short because (a) I wasnt in front of the computer and (b) I think it still needs to have one last push to get to the (E) wave.

Trade active: Short
Entry : 6907
Stop : Just north of 7000
Target: Initially 6700 (bottom of triangle)
Trade closed: stop reached: Trade closed. The long term diagonal trend line has also been broken. I have been saying for the past month or so, this is an important trend line and I would not consider changing from bear to bull unless this broke and holds. I will be watching closely over the next 24 hours to see if this holds and will review my medium term bearish/bullish views.

Bear scenario we have been following:


Bull scenario we have been keeping an eye on:
Comment: Given we have broken and closed above the long term trend line I am moving slightly bullish. I've started buying in with small positions. I think it could retrace to 7.5k before another drive up and will add further if it does. If it breaks back down inside the trend line we could move back to bearish. I'll be posting a new update in the next hour or so.
Comment: Updated idea here:

Do you see the bearish divergence on the hourly? A pull back is imminent for a good reentry point.
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monkia retiringsoon1
@retiringsoon1, yes, that and the generally over bought metrics is why I have only added a small position at this point. It would be nice to see it test and reject the down trendline. If it does that I think we could see some very impulsive price action up.
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we could go like this
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Amazing analysis. Very well done. Thank you for sharing. Learned quite a bit from it.
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thanks Monkia for the continuous updates!
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@monkia, How are you so sure about us going down?
I think up and down are 50-50 at this point, that's why we are stuck here.

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monkia cI8DH
@hkh222, if I was sure I would short now, which I am not doing :-). The set up I have explained (targeting E) would allow me to short with a tight stop not too far above the triangle. If my overall conviction was long, the same opportunity exists to go long at the bottom of the triangle. But given my short conviction and that this is a triangle on a down move, this is more likely (but not guaranteed) to be a consolidation before a further break down.
+1 Reply
Another great analysis
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enjoy your trip :)
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Habe a good vacation!
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