I started using Elliot Wave Theory (EWT) after a year of suffering a 49% loss in my portfolio. That was 2015, the year I entered the Philippine Stock market. At that time, I thought I was a “genius” after three months of trading. I did not know about the Bull and Bear markets. I didn’t know that the reason why gain was so easy was that I entered the stock market at the last phase of a bull trend.
That expensive tuition fee I paid taught me to reconsider technical analysis. Beginning in 2016, I started reading books and articles on various technical indicators. Among them, I found Elliot Wave Theory more convincing. I used it to analyze the chart of the Philippine Stock Exchange Index (PSEI) and realized that I entered the stock market at the peak of Cycle Wave III and that Primary Wave A of Cycle Wave IV was just starting to form. No wonder, starting April 2015, no matter what I do, I could not avoid the “hard punches” thrown at me.
Entering the crypto space in August last year, I never used EWT in my analysis of any cryptocurrency. However, after reading this post, I got curious and it reminded me of this technical tool. So, I thought, why not try it again even just for fun? Try to use EWT in identifying BTC’s current price action.
The chart is a long-term one. I am using a monthly time frame. Beginning in August 2017, BTC had a long rally to complete the five impulse waves that peaked last November 2021. Based on the theory, after that four-year rally, there will be a pullback, and so what we are witnessing today, which many analysts call a “Bear Market” is somehow accurate.
Wave C shown in the chart is usually described as “devastating and destructive” simply because it is also the 3rd wave. During this kind of downtrend, the price decline is commonly relentless and fundamentals are ignored. When I was still in the stock market, the typical belief is that during such a crash, there is virtually no place to hide except cash.
Nevertheless, using another indicator, 28,189 is supposed to give strong support for that is BTC’s 61.8% Fibonacci Retracement. Once such a base is broken, the next stop will be at 17,145, BTC’s 78.6% Fibonacci Retracement.
Both EWT and Fibonacci Retracement are not an exact science. They are just probability. Yes, I find it useful in stock trading from 2016 to early 2021. However, when the COVID variant launched its attack in July last year, that was the time I stumbled with cryptocurrency, and also the time I almost forgot to use technical analysis.