Understanding the Bitcoin Parabola and History of Parabolic Move
Updated
As I've said in previous posts, I fear this is a huge bull trap. I don't know for sure. I just think its a situation we have to be prepared for.
I'm a huge crypto and bitcoin bull in the long run. But I'm also a believer in cycles and patterns. And parabolic moves have an uncanny ability to follow a similar pattern.
What is a Parabolic Asset Move?
This happens when an asset is moving in a strong bullish channel for a long time but sentiment gets even stronger. Then suddenly it breaks up into an accelerated channel. Then it accelerates again, and again, as people start chasing price. The asset never goes down, so people are buying only because price is going up. Until it finally goes straight up. Then it has a crashes and it goes into a bear market.
There is also a pattern that can help us determine the length of the bear market. That first ascension into an accelerated channel marks the beginning of a parabolic move. You can see I marked it on this chart around March of 2017. This is important because the length of time to start and finish the parabola is usually the same or very similar time it takes to complete the bear market low.
Let's look at history of Parabolas
Crude Oil
Parabolic Move: 6 years, 9 months
Bear Market length: 7 years 4 months
Silver
Parabolic Move: 3 years, 6 months
Bear Market length: 4 years 8 months
NASDAQ
Parabolic Move: 3 years, 8 months
Bear Market length 2 years, 6 months
(NASDAQ the shortest bear market but made the steepest drop)
Bitcoin - The King of Parabolas
Bitcoin is amazing because its a parabola machine and has already had 3 of them. A small move in 2013 then a larger one in 2014 then of course the 2017 move.
People love to point to the mini parabola in 2013 and say "SEE, it doesn't need that long to correct, that one rebounded fast!" But if you look closely, you will see that it started its accelerated incline in January 2013. It peaked in April 2013 just three months later and then the bear market bottomed in July 2013. 3 month parabola, 3 month bear.
When you take a longer term view of the 2014 Bitcoin peak, you can see that the accelerated channel of the big parabola begin in January of 2013 and ended November 2014, 11 months later. That bear market bottomed in January of 2015, 13 months later. Again almost the same length of time as the parabola.
So the 2017 Bitcoin parabola took 9 months to complete. That means I expect this bear market to bottom around September, then start ascending to the right side of a cup and handle that will catapult bitcoin to new highs in the spring of 2019. Since bitcoin has been so strong, I would not be surprised if followed NASDAQ and peaked early around June-July, so I will be looking for lows at that time too.
Can I Be Wrong?
Absolutely. Bitcoin has done some things in its history that have blow me away. And its a very young, exciting market. It's a disruptive technology and it could boom. It could defy the odds of history. I just rely on patterns to give me realistic scenarios. My research suggests this scenario is mostly likely. Time will tell if I'm right.
What Can Change My Mind?
Just the same, it would be stupid for me to 100% count on a bearish scenario. If bitcoin really is that strong of a bull, its possible we don't make lower lows and the bear market is the shortest parabolic correction in market history. I will be looking for a weekly close with a new higher high above $11800. That would be a good start. Finish that inverse head and shoulders. Break that neckline. Then eventually get a weekly close above $13000. At that point, I'm less cautious and looking for long term bullish trades.
I'm a huge crypto and bitcoin bull in the long run. But I'm also a believer in cycles and patterns. And parabolic moves have an uncanny ability to follow a similar pattern.
What is a Parabolic Asset Move?
This happens when an asset is moving in a strong bullish channel for a long time but sentiment gets even stronger. Then suddenly it breaks up into an accelerated channel. Then it accelerates again, and again, as people start chasing price. The asset never goes down, so people are buying only because price is going up. Until it finally goes straight up. Then it has a crashes and it goes into a bear market.
There is also a pattern that can help us determine the length of the bear market. That first ascension into an accelerated channel marks the beginning of a parabolic move. You can see I marked it on this chart around March of 2017. This is important because the length of time to start and finish the parabola is usually the same or very similar time it takes to complete the bear market low.
Let's look at history of Parabolas
Crude Oil
Parabolic Move: 6 years, 9 months
Bear Market length: 7 years 4 months
Silver
Parabolic Move: 3 years, 6 months
Bear Market length: 4 years 8 months
NASDAQ
Parabolic Move: 3 years, 8 months
Bear Market length 2 years, 6 months
(NASDAQ the shortest bear market but made the steepest drop)
Bitcoin - The King of Parabolas
Bitcoin is amazing because its a parabola machine and has already had 3 of them. A small move in 2013 then a larger one in 2014 then of course the 2017 move.
People love to point to the mini parabola in 2013 and say "SEE, it doesn't need that long to correct, that one rebounded fast!" But if you look closely, you will see that it started its accelerated incline in January 2013. It peaked in April 2013 just three months later and then the bear market bottomed in July 2013. 3 month parabola, 3 month bear.
When you take a longer term view of the 2014 Bitcoin peak, you can see that the accelerated channel of the big parabola begin in January of 2013 and ended November 2014, 11 months later. That bear market bottomed in January of 2015, 13 months later. Again almost the same length of time as the parabola.
So the 2017 Bitcoin parabola took 9 months to complete. That means I expect this bear market to bottom around September, then start ascending to the right side of a cup and handle that will catapult bitcoin to new highs in the spring of 2019. Since bitcoin has been so strong, I would not be surprised if followed NASDAQ and peaked early around June-July, so I will be looking for lows at that time too.
Can I Be Wrong?
Absolutely. Bitcoin has done some things in its history that have blow me away. And its a very young, exciting market. It's a disruptive technology and it could boom. It could defy the odds of history. I just rely on patterns to give me realistic scenarios. My research suggests this scenario is mostly likely. Time will tell if I'm right.
What Can Change My Mind?
Just the same, it would be stupid for me to 100% count on a bearish scenario. If bitcoin really is that strong of a bull, its possible we don't make lower lows and the bear market is the shortest parabolic correction in market history. I will be looking for a weekly close with a new higher high above $11800. That would be a good start. Finish that inverse head and shoulders. Break that neckline. Then eventually get a weekly close above $13000. At that point, I'm less cautious and looking for long term bullish trades.
Note
I think there are only a few ways this plays out. The first is that we just grind lower from here. I really don't think we recover if we fall below $9300, though there is always a chance the market tests the $7500 area and can move up from there. I just don't find that probable based on this current structure.
The alternative view posted here is plausible if there are enough bulls to come in and buy this pullback. Either it gets bought up at $10700 area or the $10400 area. I would expect this to happen in the next 48 hours.
Then it forms an ascending triangle at the neckline, breaks through and runs up to
13K resistance. At that point, holding the breakout line becomes critical. If we get above that 13K mark on a weekly close, the bulls will gain huge support.How will I trade this. If we see signs of support, I'll cover part of my short then cover the rest if it goes up past the 618 retrace, then I'll wait for a breakout at the neckline or I will buy a pullback if we triple top. Triple tops have a high % of breaking out.
Again, its important to have a plan for different scenarios. Being hard headed and just blindly carrying a short past
12K would be stupid. Even though its clear I have a bearish bias right now, I re-evaluate every single day and I'm ready to respond if the chart turns bullish.Note
No one could have forecasted the events today that likely spooked the market. I think its a combination of Binance issues and maybe some fear that the SEC will be going after ICO's. You can see so many of the ether tokens have been tanking for the past few weeks but particular hard this morning before the Binance issues. But the bigger problem is psychological. You have to understand what has happened.
1. People ran into this market aggressive last fall.
2. Many got scared on the first drop, maybe sold and lost some money
3. More people got caught in the 2nd drop and that one was even scarier
4. Ran out of sellers so the market started moving up. You can see that we really picked up volume around $9000.
5. But we made a fast move to $11700 and not enough buyers in this area to protect price and provide good support.
6. We just double topped by running out of buyers again at $11600
7. Now we have a heavy scarey selloff down to $9300.
If we break $9300 then all of the people that just got back into this last rally will be devastated. We need buyers to come in and bring some volume if this market is to get past 12k. But between the scary drops and the looming news of regulation, it can be really hard for buyers to pull the trigger. Especially if you got caught in the first 2 drops.
That's why parabolas take so long to wear off. People have to forget about the drops and the market needs to clear sentiment.
The last hope would be for Bitcoin to make a reversal candle and recover the 618 of the move down and get back to $11700. If it drops past $9300, it will do technical damage. A weekly close below $9300 would be a giant reversal signal for long term traders. It would need major bullish news to bring back enough buyers to push it higher.
There are some great fundamentals to drive this market and its the reason I think we go way higher in the future. But long term fundamentals drive long term price, 2020 and beyond. If bitcoin is to go to 30k in 2018, it needs some good news fast.
Note
Still on track to see lows late summer.
Note
So bitcoin just made another low, which takes away the bullish EW count. More than likely it bounces soon, tests the breakdown and proceeds to find the low sometime this summer. I think the low will be between $4000 and $5500. I also think it will happen in July or August.
That said, a low under
4K is still very possible and this bear market could extend into this fall. I just think that historically speaking its more likely that we bottom, move sideways for a long period then begin a new bull market in the fall or winter. I don't think we'll have a strong bullish move anytime either. I expect we won't won't be trading above 10k for another 6-9 months.Note
We found a short term bottom here in June, but I am expected this bounce to test the breakdown area between $6800 and $7300 then proceed lower into the end of July. I then expect to hit our target area either late July or late August. I'll have to watch price action this summer to determine the probability of a major bottom.
A daily close over $7400 in July would suggest we go higher in the short term and then we may test the low or retest of $6000 in September. It is certainly possible that $5700 was the low but at this point, I do not think its the low
Note
Despite a monster rally in July, the path suggesting a late summer low remains in tact and we are only a few hundred dollars away from a new yearly low. My initial chart suggested a low around September 1st. I didn't necessary think I'd get it exactly but it looks like I'll be within a few weeks.
Now we want to see a capitulation. A big straight down move to much lower prices. ideal in the $4000 range that gets rid of the last of the sellers and allows bitcoin to find its permanent floor. We want people to say that bitcoin is done and and crypto was a fad. Look for long term bulls to give up.
That is when we will buy with everything we've got.
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