Two possible bullish Bitcoin scenarios after yesterday's moveGood morning, traders. Price dipped a bit further than expected, but so far is acting exactly as I discussed it was likely to do. We saw strong absorption on the drop as indicated by the large volume and appear to have found the bottom, for now, at around $7450. This provides two possible scenarios if price is to continue upward.
The right chart shows the possibility of price having just completed subwave 4 in the larger wave 1. This is my primary count at this time. I pulled my blue box back into this chart and we can see that the low point of this move down is about midway into the box. I also have the lower two support areas denoted by the horizontal dark red lines at ~$7400 and ~$7200. The pattern for what appears to be wave 4 in this current upward movement has developed from a pennant to a flag to a descending broadening wedge. As you can see, I have updated my EW count inside that DBW to a WXY. The challenge right now is that we aren't seeing much in the way of a rebound just yet. While not a significant issue at the moment, it could possibly mean that we are in the second scenario presented in the left chart. However, if we do see volume and spread expanding throughout today and potentially into tomorrow, then it bodes well for continued upward movement from here. That being said, price sill has to break that swing high at $8500. Failure to do so gives it a double top and we can expect price to then potentially target the ~$6400 area based on the current low last night. As we can see, that would put price at the S3 pivot on this time frame. The horizontal black dashed line shows us that it is a support area. But traders have to remember a double top isn't confirmed until price breaks the valley's low. So we would actually have to see price target that $8500 area and then also breach the $7450 low from last night afterward. If price follows this course, then we can assume that the current area is distribution with accumulation occurring at a lower point, possibly as low as that $6400 area, but we will need to continue watching price action and volume as the chart develops.
This left chart shows price having completed the larger wave 1 and currently completing wave 2. In this scenario, we can see price ultimately testing the ~$6800 demand box which would put it at the bottom of the ascending broadening wedge (denoted by the ascending black dotted lines) which price would have pushed out of bullishly as it ran toward $8500. If this scenario plays out, then my initial expectation is to see a wick down into the box and subsequent good rebound back out of it. I expect a lot of demand at that point as there are a lot of buyers who missed their entry there on the way up recently.
Traders need to remember that price is a process and the goal is to understand what may happen and then utilize what you know, as the analyst, to decipher the probabilities as to possible price movement. In doing so, traders must be fluid in their ability to remove the possible price paths that no longer make sense and add new ones as additional data makes itself known. Strong risk management is the backbone of wealth accumulation in this game, yet sadly it is the one part of trading that most new retail traders give little, if any, time to understanding and perfecting.
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