dalmazio
Short

Bitcoin Corrective Tsunami Only Half Over?

POLONIEX:BTCUSDT   Bitcoin / Tether USD
The move to $4k invalidated some key requirements of Elliott Wave Theory in regards to subwave numbering of the ABC corrective wave. Therefore, we need to re-analyze and re-number waves.

There are two possibilities here. The first is that the ABC corrective wave has completed and that we are in the early stages of a bull trend. The second is that the ABC corrective wave is even deeper than originally thought, and we are just nearing the end of corrective subwave B of the ABC correction. However, market analysis doesn’t only consist of technical analysis , we also need to consider fundamental analysis , and market sentiment. The three pillars of market analysis.

Fundamentals are weak, given the political environment in China, and the announcement by the Chinese government that all crypto exchanges will need to be closed by end of Sept. with a grace period being given to a couple exchanges to the end of Oct. What this means is that there will likely be a large migration of volume to other asian markets, likely Korea, Japan, and others. In addition, it is also highly likely, that many Chinese will just sell and withdraw their Chinese Yuan, and so this news is highly bearish for Bitcoin and all crypto in general, as Bitcoin sets the overall market trend.

Market sentiment is still quite bearish . There is a market-wide feeling of fear, uncertainty, and doubt. There is a feeling of distrust of the recent bull move, seeing it as a kind of bull trap before even deeper lows are realized. It seems many are quite content to sit on the sidelines, waiting it out until things stabilize and there aren’t so many contradictory signals.

Given this, I am of the view that we are very mush still entrenched in a bear market and the second scenario that we are moving to deeper lows is much more likely.

In this context, it appears that we are nearing the end of the B wave of a larger ABC correction. This B wave has a notorious reputation for being a bull trap, as it can appear quite aggressive. We may still have some room to continue the B wave to the $4100 or $4200 range, but when it finishes, we should begin the C wave of the ABC correction. And this wave has the potential to bring us down to somewhere between the $1800 and $2500 area.

So the ABC correction looks very roughly like this:

A wave: $5k-$3k
B wave: $3k-$4k
C wave: $4k-$2k

Preliminary price targets for wave (II) correspond to wave (I) fib. retracements of 0.5 and 0.618 giving $2475 and $1835. In addition, we have the 1.0 extension of wave A at $2081.

On top of that, the long-term trend line (1d) intersects this price territory at around the $2500-$2600 level. And the last time we had a major correction (40%), we closed about $100 below this trend line for a few periods (over half a day) before reversing.

Also, establishing a parallel descending trend channel for the current ABC correction, shows that we can reach our targets without ever leaving this channel.

Lastly, experimenting with the Fibonacci sprial tool shows how these price targets can touch the spiral with target lows reached sometime in very early October. The chart is scaled so that this fib. spiral aligns with the fib. time-based extension tool, for calculating wave C as the time-based fib. 1.0 extension of wave A (or at least it was, but publishing seems to have re-scaled it slightly and moved the spiral just short of the fib. 1.0 vertical).

Target I: Wave (II) = intersection of long-term (1d) trend-line ($2575)
Target II: Wave (II) = 0.5 x Wave (I) ($2475)
Target III: Wave C = 1.0 x Wave A ($2093)
Target IV: Wave (II) = 0.618 x Wave (I) ($1835)
Comment: Bitcoin consolidating at the moment with sideways movement in a near-rectangle holding pattern. Prepare for the break in one direction or the other. Sister crypto Ethereum shows rising wedge forming which is a reversal pattern and bearish. Therefore, favoring a downward break for Bitcoin as well, but watch for both.

Comments

Appreciate the great info, especially as im a new trader waiting to buy in to BTC! , hopefully i pick the correct wave! hopefully target III
+1 Reply
dalmazio AaronHughes
@AaronHughes, One strategy to help ensure you don't miss the boat, waiting for a deep target that may not quite materialize, is if/when we start hitting targets, to begin buying in small quantities, and continue buying small as we head lower. The key is not jumping in too deep too quick. Will you get the bottom? Probably not. That's difficult. But at least you will have exposure to good prices that are approaching bottom.
+1 Reply
AaronHughes dalmazio
@dalmazio, Oh i see, i completely get that, so essentially know where the possible bottom is, but set targets for prices you'd be happy to acquire small amounts at in case it doesn't hit that bottom you may expect, but like have a range in mind? Am i on the right track?!
+1 Reply
dalmazio AaronHughes
@AaronHughes, that's right. Not buying all your holding at one price, but scaling in at a range of prices to be safe.
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I agre sentiment is very bearish and I know a lot of ppl are shrugging off the ico regulation stuff and now there trying to shrug off china basically banning and stopping all exchanges for bitcoin. But in my opinion this is much bigger news than ppl wanna believe and this is a reflection of what is to come in the future. there will be continue to be more regulation step in and more bans being placed leading to a further decline in the overall market. I do believe that bitcoin will make it through it but I think we have a long way to go before we can really go next level with investors and big companies getting involved in this market.
+1 Reply
@Playj, agreed. Bitcoin almost certaintly will reach new highs eventually, but probably not for a while, and we have to revisit previous lows first and consolidate.
Reply
Thank your efforts - You logic makes absolute sense , i sold out of a portion of BTC last night at 4050 in belief of this
+1 Reply
@hgiddy, I'm glad this analysis has helped confirm your own intuition. Stay watchful.
+1 Reply
Thanks for the analysis and the recognition that rumor/news does indeed impact price action, which is something many TAs refuse to acknowledge even in light of recent events.
+1 Reply
@guppy_, definitely. Seems very reasonable to consider all the information available to help inform/guide any subsequent TA.
Reply
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