In my last article, published on Seeking Alpha, Steemit, and Trybe, I described the current setup in Bitcoin which had the potential to usher in a new bull market, ultimately culminating in a target of at least $65,000. In fact, the day that our article came out was the day Bitcoin began its last strong rally.
While our upper long-term target remains intact, the immediate setup pointing to $6,000 is at risk. And, if we break below $3330 in 5 waves, we will likely see new bear market lows.
What has caused us to consider further bear market lows? Well, this is where we get into a detailed Elliott Wave analysis. And, before I begin the detailed analysis, you may want to review the 6-part series I published explaining this methodology:
Generally, third waves within a 5-wave structure subdivide into five waves as well, with the first wave of the 3rd wave pointing to the .382 to .618 extension of waves 1 and 2. And, when what should be the 1st wave within the 3rd wave extends higher than that, it opens the door to that rally being a corrective rally, setting up a drop to lower lows. That is exactly what Bitcoin did, as it topped near the .764 extension at $4185 before seeing a hard rejection on Saturday night.
The move to this extension was already ominous to me, even while price was pushing hard northward. As the lead cryptocurrency analyst on Elliott Wave Trader, I suggested to our subscribers to tighten their stops to $4030. Ultimately I was stopped out at a profit while I was sleeping, as Bitcoin dropped to $3770.
Today, we see two potentials: An uncommonly high 1st wave within the third wave topping at the .764 extension of waves 1 and 2 or a corrective c-wave top. The latter pattern may point us towards the $2500 region for the next potential chance of bottoming. The pivot between the two now lies at $3500. If we can hold that level correctively, than we can break back out to the upside and continue on our way to the initial $6,000 target.
In the bullish case pointing towards $6,000, the drop Saturday night was only the a-wave of this a-b-c correction, with the ideal support in the $3500 region. And, as noted before, breaking below that support in impulsive fashion will likely be pointing us down to the $2,500 region.
In the bearish C wave top, we can hit bear market lows. But to consider this primary we will need to take out $3500, then $3300 before going lower.
Certainly, crypto traders must be exacerbated by now. But price is king, and if support does not hold, we will look lower for another buying opportunity. I like many want to see an end to the bear market. Yet the move off the low is still small in the grand scheme and has yet to confirm much higher prices are in the cards.
I've illustrated the bearish potential in orange, and this may be on the first 'leg', with bullish in white. Sorry I cannot zoom in as I recently accidentally cleared intraday data and cannot retrieve it.
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Note none of my work including the larger body of work for subscribers is intended to be a trade recommendation a I do not know your financial means, or risk tolerance. These are valid setups that can provide return, if using tight risk management with stops.