Starting with the big picture. If this downtrend that we have been in recently is done which I believe it was wave C of the big wave 2, we are officially starting our new wave 3. We bounced that 0.786 Fibonacci retracement level which is a very beautiful ratio for wave 1 2 structure. As I mentioned in my previous posts, that 0.786 fib region has confluence correlations which means there are a lot of fibonacci supports for various structures and some trendline supports as well all coinciding. The rule that we always gotta remember for wave 3 is that it is “often the longest, and never the shortest”. Wave 3 should have characteristic of some impulsive momentum throughout its formation. This means for decent amount of time, we should keep our eyes on our new waves impulsiveness.
As long as we don’t retrace more that 100% of the wave 1, in other words, as long as we don’t end up dropping below that orange line, I don’t expect any wave failures which might lead us to wxyz correction which then we must consider the $4000 scenario.
We still have to keep in mind that we are still in the bearish zone. The trendline that has been forming throughout our wave 2, is acting as a strong resistance. Until we break out of that massive trendline resistance around $8300, we are not considering longer-term uptrend. I believe as soon as it breaks the upper line, many buyers are expected enter some the trades. Also, as I drew it in the image, the falling wedge pattern is being formed which gives us two choices; either change of trend (end of downtrend) or more severe downtrend.
In 2 hour time frame, we can see the rsi has gotten over the resistance and it is now acting as our support. However, in the lower time frames we are observing some divergences, thus we should not be too relieved.
Talking about the EMA. I personally use 8, 13, 21, 55 moving averages, which I think is very adequate for cryptocurrency market. In daily chart, we are heavily resisted by the 8 EMA. For 4hr chart, we broke 8, 13, and 21 and is resisted by the 55. In this perspective we still have many EMAs above that is acting as a hard resistance and we should know that we still have a long way to go through.
