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Bitcoin: Final phase of correction is near

Updated

The final phase of the correction of Bitcoin is in preparation, after the market invalidated any bullish scenarios to an early end of the decline.

After an orthodox top in April, that delivered the all-time-high in form of wave B of an expanding flat, the Bitcoin market rapidly collapsed to a support zone of 29,000 to 31,000 USD on May 19. This decline was the third wave of leg C of the expanding flat. Wave four brought mostly sideway action for a month in form of an WXY double-combination, consisting of a flat ABC and a zigzag ABC, to culminate in wave Y of the combination on June 15. The next phase of correction is completing the wave structure of the C-leg in wave five, in progress. It consists of a diagonal triangle (3-3-3-3-3) with wave one delivering a blow into the support zone (to below 29,000) on June 22. This local bottom of the correction has remained in place so far. The diagonal produced a third wave that ended in the early morning hours (EST) of July 21, but failed to take out the low. Therefore, the bottom slope of the diagonal has been raised and established, and price action quickly reversed to the upside for wave 4 toward the top trend line. This will result in a three-wave move, ABC, or a more complex structure, like wave three. After touching the top trend line, the final wave five will dive and should take out the existing correction low and finalize the correction in the area indicated.
If the analysis is correct, and an orthodox top was indeed established for the ATH, this will be a milder correction than many have forecast. Current estimated target is in the area around 27,000 US Dollars.

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Caution.... It appears that the (a) and (b) waves of wave ((iv)) toward the top of the diagonal are already in place, near the bottom trend line.

Here is the detailed structure, so far:

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BTC is racing toward its top of wave ((iv)) in a hurry. Wave three of the impulse was super long. I think just subwave five needs completion. The top will settle the diagonal trend line and initiate the dump.

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Volume is picking up.... as expected.
It's going to happen today.

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Based on Fib ratios, I believe the top of wave ((iv)) will come in around 34,000 for the trend line anchor. Subwave 3 of wave ((iv)) reach a ratio of 5.618, and there seems to be confluence with that kind of extension based on wave (1) of wave v.
34,000 would also be a natural level of resistance, based on the round number.

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But nothing in the book prevents this from dumping at any time from now on. There is no real need to go that high. We are just short of 32000 at this time.

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BTC is struggling around $32,000, and the 100% fib level of wave one. It did finally punch through by a hundred dollars, but this may turn out to be an ending diagonal.

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BTC broke through the resistance at 32k, but this is now followed by a volatile session between 32k and 33k. Volume continues to pick up and the end of wave four in the diagonal appears near. This seems to be forming an expanding diagonal, which spells rapid trend reversal within the hour.

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FInale appears imminent. This could easily spike up to $34000 before reversal.

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Here is a visual update of the concept. Wave four, red encircled ((iv)), of the major diagonal seems firmly established now, and that fixes the top trend line of the diagonal, which has been adjusted here from the original picture of this post.

This morning, we discovered a structure that at-first looked like a bull flag for another leg up, providing some short-lived hope for a bull break-out. But it showed too much diagonal character (hesitation) in its final wave, not even challenging the top trend line. It really breaks down as a 3-3-5 flat, to form the (a) and (b) legs of wave ((v)) down. All legs of a diagonal triangle are 3-3-3 structures. So to confirm this whole scenario, BTC just needs to complete a five-wave dump into the mid-20k.

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It seems the descend is in fact in slow progress.
Here is a more detailed chart at the top of range, now exiting the wave A/B zone.

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Ok, the first wave of the C-leg down is in and it was.... you probably guessed it ... another diagonal. A leading diagonal for wave 1, followed by a sharp spike up for wave two (61.8%) and now wave 3 is in progress with more volatility. ETH is following, but with more dynamics, as usual, with already 1.5% loss.

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Something funky is going on here, I feel. This wave structure now smells of upside action, not anymore of a downward completion.

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Top trend line got broken.

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Ok, top trend line is just that... a line drawn by some guy making predictions (me :).
There was nothing sacred about that line. We need to let the market tell us where to draw lines, so until there is more concrete price action I am sticking with this setup. I have moved the (a) and (b) component of ((iv)) to the top structure of today, and now this whole leg looks a lot better proportioned in the overall pattern of the diagonal. Things do get tighter in the end of the triangle, but not too tight. It is hard to assign wave structure and degree in a running market, live, in real time. It is almost impossible not to commit misjudgments, and the market seems to know that.

Here is an updated assignment:

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I will still update tomorrow. And if nothing has changed from now, I might discuss the possibility that wave five (down) does not extend beyond the bottom trend line, or is even truncated, as the latter is not an uncommon situation, and would perhaps be most appropriate in this scenario, as there is such strong opposition to move too far into the support zone.
You may have noticed that the scenario as posted relies on a sizable throw-over of that trend line.

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Overnight, the fifth wave of what is labeled (b) completed, and raised the diagonal trend line once more. A retrace is still in progress and its nature remains unclear still, but it resulted in an expanding diagonal, completed, so far to about the 0.681 level of the five-wave sequence.

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The outcome of the current wave out of the expanding diagonal determines whether this is a down-trend (per this idea) or a continuation of the up-trend that would break the trend line.

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I can't shake the feeling that the end of correction is closer than anyone thinks. But let's not get ahead of the market.

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Nice dive here according to concept. But question is, how deep will it go?
Current retracement of prior move is 78% already, got rejected at the 32,000 mark, but seems to want to go lower. Bullish sentiments should be invalidated around 31.7k.

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This now looks like a clear 1-2 sequence looking down... If so, BTC is ready for a trip in wave 3, and it looks like it can have enough energy (fib ratios) to reach the bottom of the diagonal, but will probably need its fifth wave to get there.

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Interesting action there... Looks like an expanding diagonal with a breakout-large-throwover fifth, like I expected in the other direction at the bottom to make a final low. Fake-out? Trap ? before the dump?

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Here is snapshot:

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It can be counted as. 1 - a - b - c - 2. with an expanding diagonal in c.

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WOW.

This was today's work. A parabolic ending above my trend line just in time for dinner.

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I suppose that can technically qualify for a completed fifth wave to end the large diagonal. The exit out of this was all but bearish.

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BUT, I am skeptical.
Let's not get carried away with premature sentiments.

Please look at my original chart posting and click on the play button to play out the market since I posted this.

I originally thought that the wave (iv) of the diagonal would come in around 34,000. And that chart now is almost perfectly filled to that level.

I must reevaluate the wave count of the entire leg, which I collected in real time. This is an very difficult task to get perfectly correct the first time. It needs to be reviewed, scrutinized. Let's not dictate our ideas on the market, but let the market tell us what it has done.

I lowered that trend line during live action, because it was convenient to justify my prevailing ideas. I should have heeded the technical reasons for placing the top around 34000. It is the typical height of a leg based on the size of the prior leg.

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BTC finally decided to show us 34,000.

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All this chop at this top are retracements of each individual extension on the way up. Each five wave sequence has to be retraced individually, plus the entire leg. This is amazingly complex. I don't know how nature keeps track of all this, where does it store the information during this time period?

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The new high in diagonal wave four allows us to update the target area for the downside of all this. Here is a picture.

It pulls the target area up quite a bit. If this entire analysis is correct, then the correction target is not lower than 27,800 or so, and based on everything we have seen, I doubt this is going to reach 29,000, and may not put in a new low for the entire correction from May.

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Diagonal fifth waves sometimes get truncated, not reaching the trend line, and with enough bullishness it may only end at the top of the red target area. Volume might give an indication, as it should decline toward the finish.

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Notice: in this last chart update, I did not update wave labels in the upper half of the last leg.

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LOL. Shall I reinvoke my original bullish scenario?

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Turns out this analysis is quite good, in hindsight. The trick is to recognize that very short fifth in diagonals are perfectly valid. I found another example in Ethereum. See chart, below.

This means that my comment on July 23 about the short fifth was perfectly on target. The market just could not wait to head north, and truncated the fifth. Truncated fifth are often indications of imminent market reversal, and revering the market sure did.

As I write this BTC has punctured well into the resistance zone and is trading above 42,000.

Here is the ETH chart with supershort fifth:

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To conclude this chapter, here is my final assignment for the correction of May to July 2021.

In hindsight, it remains difficult to maintain the previous wave counts for this correction. From early on I noticed the horizontal character of the entire correction in wave 4 of the wave C. A double-three was my alternate count for the start of it, if the rest didn't work out according to the advertised scenario, as indicated in the chart.
Now that we know the outcome, a triple-three combination completes the picture perfectly. This is a WXYXZ structure, consisting of a W-flat (ABC), and two zig-zags (ABC), Y and Z. Wave Z concluded the fourth wave of the corrective impulse (12345) from the top in wave (C), and an ending diagonal form wave 5. Ending diagonals indicate major trend reversals, and the swiftness of this was apparent to all traders who closely observed the action that day, 21 July 2021.

In the meantime, the new leg up has continued the bull market trend since the COVID crash in 2020.

unbeldi

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