BITCOIN’S MEGAPHONE TOP - WILL IT OFFER A GET OUT OF JAIL CARD?
Updated
Background - Bitcoin has limited price history and earlier moves are so volatile and spiky that it makes it very hard to do usual technical analysis. However from my historical charts you will see that I noted Nov 2013 as major wave 3 and was expecting wave 5 to develop from Jan 2015.
Yet the price progression and the actual development of pattern call that into question and caused me to wonder if Nov 2013 high was actually the major wave 5 top. Consequently, I assumed that the bounce of the 2015 low was a retracement bounce. That might still be the case. Now that we have enough price history from that low to enable us to make a calculated guess of what this might indicate regarding future price path.
So here are the 2 possible scenarios (both indicating price weakness in the short term):
1. That the Nov 2013 was the major 5 wave top and that we have seen the bounce from Jan 2015 low as triple zigzag which upon completion will revert to downside in ongoing bear market since Nov 2013.
2. That Nov 2013 high was major wave 3 and the decline since into Jan 2015 low completed major wave 4 and since then we have developed a major wave 5 which instead of taking the usual form that of an impulsive move of 5-3-5-3-5, it has taken the form of 3-3-3-3-3 expanding ending diagonal (Megaphone) and if this proved to be the case then we have truncate wave 5 where the top fails to take out the price high of wave 3 (see detail of Truncated wave 5 in section 2.3 at my.elliottwave.com/resources/free/elliott-wave-tutorial.aspx ) screencast.com/t/8x7WowPWXs
So it seems that we are in very late stage of that cycle which is likely to complete around $800 zone (see charts below). Or that we are completing 1st zigzag of intermediate wave V and could experience a pullback to $700 zone with final zigzag to follow leading into completion of this cycle (around $900 – see charts below) since Jan 2015 low.
Many have noted the rising wedge developing in the price action of Bitcoin and have attempted to draw this with variation covering different price zone and time frame. This confusion is further complicated when using Log Scale where it appear like rising wedge from the Jan 2015 low (or at best a rising channel) Vs Linear Scale showing a megaphone shaped pattern.
The important rising wedge to take note of is the one being formed from the low of 13th November 2016 and which is nearing completion with upside being capped around $800 on BitStamp.
Rising wedges in this position are topping pattern suggesting that we might have entire cycle from Jan 2015 low being completed or the one which started from 2nd August low. So even if this is not a full reversal (with final zigzag to follow) it suggests a pull back is due which could drop to around $680 -$700 area.
If this zone holds then we are likely to have one more minor zigzag to the upside to follow and which could end around $900 - $950 zone as a last get out of jail card for any longs to take protective action.
Series of charts below show the details.
Warning: This is my interpretation of price action using TA approach that I consider helps me the most but could be completely wrong. Therefore as always, do your own analysis for your trade requirement and ignore my views.
For those who appreciates my analysis, select to follow me and the chart for notification of future updates. Indicate you like my analysis by thumbs up, comments and sharing it with others. If you have an alternative idea then please be constructive and share for all to learn from.
Thank you for taking the time to read my analysis.
DanV
Yet the price progression and the actual development of pattern call that into question and caused me to wonder if Nov 2013 high was actually the major wave 5 top. Consequently, I assumed that the bounce of the 2015 low was a retracement bounce. That might still be the case. Now that we have enough price history from that low to enable us to make a calculated guess of what this might indicate regarding future price path.
So here are the 2 possible scenarios (both indicating price weakness in the short term):
1. That the Nov 2013 was the major 5 wave top and that we have seen the bounce from Jan 2015 low as triple zigzag which upon completion will revert to downside in ongoing bear market since Nov 2013.
2. That Nov 2013 high was major wave 3 and the decline since into Jan 2015 low completed major wave 4 and since then we have developed a major wave 5 which instead of taking the usual form that of an impulsive move of 5-3-5-3-5, it has taken the form of 3-3-3-3-3 expanding ending diagonal (Megaphone) and if this proved to be the case then we have truncate wave 5 where the top fails to take out the price high of wave 3 (see detail of Truncated wave 5 in section 2.3 at my.elliottwave.com/resources/free/elliott-wave-tutorial.aspx ) screencast.com/t/8x7WowPWXs
So it seems that we are in very late stage of that cycle which is likely to complete around $800 zone (see charts below). Or that we are completing 1st zigzag of intermediate wave V and could experience a pullback to $700 zone with final zigzag to follow leading into completion of this cycle (around $900 – see charts below) since Jan 2015 low.
Many have noted the rising wedge developing in the price action of Bitcoin and have attempted to draw this with variation covering different price zone and time frame. This confusion is further complicated when using Log Scale where it appear like rising wedge from the Jan 2015 low (or at best a rising channel) Vs Linear Scale showing a megaphone shaped pattern.
The important rising wedge to take note of is the one being formed from the low of 13th November 2016 and which is nearing completion with upside being capped around $800 on BitStamp.
Rising wedges in this position are topping pattern suggesting that we might have entire cycle from Jan 2015 low being completed or the one which started from 2nd August low. So even if this is not a full reversal (with final zigzag to follow) it suggests a pull back is due which could drop to around $680 -$700 area.
If this zone holds then we are likely to have one more minor zigzag to the upside to follow and which could end around $900 - $950 zone as a last get out of jail card for any longs to take protective action.
Series of charts below show the details.
Warning: This is my interpretation of price action using TA approach that I consider helps me the most but could be completely wrong. Therefore as always, do your own analysis for your trade requirement and ignore my views.
For those who appreciates my analysis, select to follow me and the chart for notification of future updates. Indicate you like my analysis by thumbs up, comments and sharing it with others. If you have an alternative idea then please be constructive and share for all to learn from.
Thank you for taking the time to read my analysis.
DanV
Note
Whilst the minor wedge described in in the main chart proved to be the leading diagonal rather than ending diagonal hence the recent strong move up to new high for the cycle, it does not alter overall larger picture in that we are still in major 5th wave in the form of megaphone which is now becoming more distinct. Therefore in the current leg we might have some room and could higher level, it might complete the entire cycle or the 1st lager zizgag with pull back and 2nd zigzag to follow before completion of the larger 5th wave. Megaphone are very volatile and could end very abruptly. Here is the updated chart Note
Provided you overlook the fact that I thought the rising wedge was actually the completion of the cycle but it turned out it was start of the leg of the zigzag of final wave of the cycle.This now seems like it is completed. I gave the heading will BTC offer free get out jail card. This will be the case if we hold above 700 but ideally above 800 in which case we might get another bounce which could retest 1000 zone or even make new ATH. But that cannot be counted upon of the cycle has already completed. If it has then we have long period of bearish cycle ahead of us which is not most wish to hear and so it is just my own view based on my interpretation.
It can be totally wrong as I have always said. But if the broader picture plays out then actual levels I suggest in my charts are less important in order to focus on the overall theme.
Here is the update chart which I shared earlier.
Note
Here is a different version of the chart. See the ADX (Brown) appears to be topping out at usual topping level along with Stochastic having topped with very tight coiling. That suggest that the trend in existence prior to that has now likely ended and we could see very deep retracement or new bearish cycle in development. Note
Anticipating a falling wedge as leading diagonal. s3.amazonaws.com/tradingview/snapshots/e/EuGiD9tK.pngNote
Update – 11th Feb 2017: From the Jan 2017 high the anticipated drop only formed a zigzag decline rather than falling wedge (5 wave). Since it which it has continued to retrace to $1080 zone being 78.6% fib retracement to the upside and has sold off strongly to $936 on Finex which is likely to be a new bearish cycle.
From $936 the price action accompanied by lower volume taking much longer that looks corrective. This retracement bounce might make it to $1000 which might be potential resistance as round number. If correct, the downside could be retesting the last low around $700 or form new lower low. I risk being laughed at as there are many who keep asking what will make me admit that I am wrong. Well right or wrong here are the charts.
Note
BTW - as per the chart title, that Feb high might have bee the get out of jail card. Any longs should carefully review their risk.
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