Why the Bearish Elliott Triangle Break Down on BTC Was a Failure
Updated
Last month I was watching for Bitcoin prices to fall to under 4000 this month. However, that never happened, in fact, the bears lost all their momentum at 5700, and instead of breaking down further, created a massive bullish divergence.
Normally, when a triangle breaks down the post-triangular thrust should be at-least as powerful as the biggest leg of the triangle, in this case wave-a. I have painted that scenario in yellow. However, you can clearly see we did not do that, and also in the same amount of time that wave-(a) took to drop 65%, we've only dropped 25%. So clearly bears are starting to lose a lot of momentum here. They've also failed to take us to significantly lower prices despite all the time they've had to do so. All this evidence points to this being a failed break down from this triangle, meaning that the above count is incorrect.
Other reasons why this count is very unlikely: First of all, wave-(a) is definitely not impulsive. It violates the overlap and extension rules, two critical rules that both cannot be simultaneously violated, as well as it's internal structure which appears to be a corrective expanding triangle. A Flat can be ruled out because wave-(b) is too small in price. Wave-c is also bigger than 0.618 of wave-a which makes it less likely to be a real contracting triangle. Wave-e is also very small in time and price compared to the rest of the triangle. The structure of the post-triangular thrust also appears to be corrective and not impulsive.
There's a remote possibility that we actually haven't created the real wave-e yet, but that is unlikely due to the fact that wave-(a) isn't impulsive, and wave-d lacks alternation in price, time and complexity compared to wave-b, and wave-c is bigger than 0.618 of wave-a in price. All these factors lead to the probability of a larger bearish triangle being very very low.
The next best count is the one that I have published recently. Some reasons why this count is better is because it conforms to all Neely-Elliott rules, has all required price and time relations, fits in with the momentum and harmonic analysis, and fits into the larger and smaller pictures. It's also price and time similar to the 6-month contracting triangle we had in mid-2013. Since the probability of the alternative count is so low, and the probability of the bullish count being very high, I suspect that we should see significantly higher price by next month.
On the short-term chart, we also have many consecutive waves that are all very time and price similar, leading to a high probability that a diametric or symmetrical pattern is forming and nearing it's completion now, which will complete wave-e of the bullish triangle and begin a new uptrend. The alternate to that count, forming an x-wave after wave-g, is very unlikely due to the size of the x-wave, and also that it doesn't fit into the larger picture very much at all. Because the bearish counts on all time frames are incredibly weak and flawed, it gives the bull case a much stronger probability of being the correct count, though we'll have to wait and see how this plays out to know for sure.
All constructive comments and questions are welcomed. Like and follow for more ideas.
Normally, when a triangle breaks down the post-triangular thrust should be at-least as powerful as the biggest leg of the triangle, in this case wave-a. I have painted that scenario in yellow. However, you can clearly see we did not do that, and also in the same amount of time that wave-(a) took to drop 65%, we've only dropped 25%. So clearly bears are starting to lose a lot of momentum here. They've also failed to take us to significantly lower prices despite all the time they've had to do so. All this evidence points to this being a failed break down from this triangle, meaning that the above count is incorrect.
Other reasons why this count is very unlikely: First of all, wave-(a) is definitely not impulsive. It violates the overlap and extension rules, two critical rules that both cannot be simultaneously violated, as well as it's internal structure which appears to be a corrective expanding triangle. A Flat can be ruled out because wave-(b) is too small in price. Wave-c is also bigger than 0.618 of wave-a which makes it less likely to be a real contracting triangle. Wave-e is also very small in time and price compared to the rest of the triangle. The structure of the post-triangular thrust also appears to be corrective and not impulsive.
There's a remote possibility that we actually haven't created the real wave-e yet, but that is unlikely due to the fact that wave-(a) isn't impulsive, and wave-d lacks alternation in price, time and complexity compared to wave-b, and wave-c is bigger than 0.618 of wave-a in price. All these factors lead to the probability of a larger bearish triangle being very very low.
The next best count is the one that I have published recently. Some reasons why this count is better is because it conforms to all Neely-Elliott rules, has all required price and time relations, fits in with the momentum and harmonic analysis, and fits into the larger and smaller pictures. It's also price and time similar to the 6-month contracting triangle we had in mid-2013. Since the probability of the alternative count is so low, and the probability of the bullish count being very high, I suspect that we should see significantly higher price by next month.
On the short-term chart, we also have many consecutive waves that are all very time and price similar, leading to a high probability that a diametric or symmetrical pattern is forming and nearing it's completion now, which will complete wave-e of the bullish triangle and begin a new uptrend. The alternate to that count, forming an x-wave after wave-g, is very unlikely due to the size of the x-wave, and also that it doesn't fit into the larger picture very much at all. Because the bearish counts on all time frames are incredibly weak and flawed, it gives the bull case a much stronger probability of being the correct count, though we'll have to wait and see how this plays out to know for sure.
All constructive comments and questions are welcomed. Like and follow for more ideas.
Note
This is another probability we can most likely rule out, due to the fact that wave-c of (b) does not channel properly for an impulse, is missing the extension rule, has improper sizes for waves-2 and -4, and it was not retraced faster than it was formed like it should be in a flat. All this evidence points to this count also being incorrect.
However, even IF this count was correct, we should still get a bounce here. We'll know for certain this count is incorrect when the market retraces all of wave-(c) (on the last chart) faster than it was formed.
Note
This is the one alternate idea I've considered so far that seems like it may actually have some real potential. We could possibly be forming a diametric pattern here, because of how time-similar all of the waves are. It's also somewhat abnormal (but still within guidelines) for wave-e to be almost as big as wave-c, and to have broken down so low if this was actually a contracting triangle.
So at this time, it's important for us to consider the above possibility meaning we could have more consolidation or even lower lows after a big wave-(f) up to around 8000.
Honestly, the more I think about it, the more this seems like the more likely count. But at this point, we'll have to wait and see what happens. If wave-(e) is retraced faster than it was formed, then we are most likely going to continue up to ATH, however, if it's not fully retraced and we begin to break down around the end of the month, then we will likely be forming a wave-g which could take us significantly lower before finally getting a run up to ATH.
Note
Here is the same pattern forming on ETHUSD. Because this count fits better to the whole market, and because there is strong time similarity between the waves, and because of the size of wave-e of my old contracting triangle count, I am switching the new diametric count to the primary count for now, unless we get a very powerful break up.
I am now strongly doubting the contracting triangle count because it simply does not work with most altcoins, but its now the best alternate count. Due to the time similarity of all the waves it definitely seems like the evidence is strongly pointing towards a diametric.
Note
Published the diametric idea as my new primary count:Note
Note
After some careful consideration, there is one more possible alternate count. This is actually the same count I used on my LTC chart a few weeks ago. Though this count has the exact same implications as the contracting triangle (ie. we end the correction now and begin a new uptrend to 100k now). This pattern technically fits on all the altcoins too but it's kind of strange that the b-wave is at such a high point, though that doesn't necessarily invalidate that pattern.
Because we have multiple valid counts that say this could be the end, and because we have another valid count that says this is an intermediate bottom, and we because have a short-term chart that agrees with all three possibilities and should be bouncing very soon, the best thing to do is to wait for a big bounce, and see how high it goes. If we break up above wave-(e) then its very likely this will go straight to ATH. however, if the next wave up is lackluster and we can't really break 10k then most likely an f-wave will form and we'll get one more final leg down from there.
For now, since we can't rule anything out based on our EW rules, the only prudent thing to do will be to wait and see what happens after this bounces. It should be fairly clear what is going to happen after that.
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**Correction to the last comment**If we break up above wave-(f)* then it is very likely this will go straight to ATH
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tradingview.com/chart/hP9uQijO/Techincally, this could be another idea that says that we're at the end of the correction now. It's possible in a diametric for all waves to be similar in time except for one to be either significantly smaller in time or bigger. In this possibility we have it painted as being smaller.
While this may confuse you because now their is four possible counts, it's important to note that ALL 4 possible counts are bullish, and 3 of 4 counts have us going straight to ATH from here.
Since we can't rule out either count at this point, I'm going to assume that both scenarios are possible, so it will depend on how strong this bounce is to determine whether or not we are headed to ATH right now or going to make another wave down (possibly to as low as 4k) before we head to ATH. Either way, whenever this correction resolves, it will most likely go straight to ATH and head towards 100k+ by next year.
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