BTCUSD update: Price declines significantly breaking below the 6900 support and triggering the water fall of sell orders which is perfectly normal. While the double top is confirmed and the bearish momentum in play, this is NOT the time to be buying supports unless you are day trading.
In terms of wave count, this is the A Wave which is the first leg of a corrective formation. Often the B Wave is the bullish retrace that establishes a lower high, which is then followed by the C wave which is the deeper and emotional wave the completes the correction. At the moment, the .382 resistance measured from the 7900 high is at the 7000 level. This means as long as price stays below this resistance, this market is likely to continue lower. Keep in mind B Waves often go to the .618 resistance before the C Wave begin.
In recent months, these corrections have been tricky. They have been brief, and the bullish trend has continued without much interruption. That can happen here also, but I have no intention of buying into this retrace to find out. At this point, momentum is bearish and I expect supports to break, until one of two things occur: price retests a MAJOR support area and finds enough stability to present a reversal pattern on a larger time frame, or price spends enough time in a consolidation to qualify for stability and potential continuation of the larger bullish trend. (Like the formation that occurred on early October).
The projected support that I am looking for to eventually be retested is the 6048 area which is now the .382 of the bullish structure measured from the 3005 low. It also happens to be in line with the old resistance that was part of the previous consolidation earlier in October. That is a reasonable completion point which I do not think will be retested in one single leg. It would be a convenient level for a Wave C to complete and I will be watching for that type of price action.
A decisive break below this support, and price may be working its way toward the 4950 area which is now the .382 of the entire bullish structure measured from the sub 100 lows. This level is not that unreasonable in terms of the bigger picture. These are the levels that are within reason BASED on market structure. I know the limits of TA and do not pretend that it provides an absolute forecast of what will happen in the near future, I am flexible and adjust with the market.
In my previous report I wrote about looking for opportunities in the alts, but the main ones, ETH and LTC got hammered in this sell off as well which once again demonstrates the inconsistency of the BTC/alt relationship. BTC goes higher, the alts sell, BTC gets hammered, the alts sell too. So instead of playing victim to it, I just look at each market individually and wait for opportunities to appear while putting much less weight on the BTC relationship. And on that note, the big winner is BCH which is now pushing 1k (very nice call by @goldbug1 on that one). Another great market if you are agile, the funny thing is this one was selling off along with this market until today (I'm sure it's news related).
In summary, my plan has not changed: Avoid this market, look for opportunities in the alts if the levels and formations make sense in terms of risk on their respective charts. If you have the skill and experience to day trade, there is plenty of opportunities to buy and sell these large intraday moves (600+ points in a day is a lot to work with). This sell off was coming, like I wrote previously, the structure was in place. Anything could have sparked the avalanche of sell orders. Being long term bullish on these markets, I am all for buying pullbacks, but the key is not to buy too early. Right now is too early for a larger time frame type of strategy like swing trading in my opinion. Don't be shaken by the drama pouring out of the media outlets. Stay calm, be flexible and most importantly have some kind of plan.
I think that 6048 is entirely possible. It's also supported by moving average analysis of previous bullish periods
On September 5th, we dropped from all time high($4980 on Bittrex) back to $4001 in 4 days. That $4001 was a 37 day moving average. At this moment, that MA line is at $6086 - so that is on the table for the next 24 hours.
On June 15th, we dropped from an all time high of $2980 back to $2120 in 4 days. That $2120 was a 47 day moving average. At this moment, that MA line is at $5618.
By the way, in both these bullish periods (and the ones before that), the 26 moving average was not broken again after a the previous all time high was broken until the new all time high was reached. Let me give an example: after the June high of 2980 we dropped to 1830 (.382 fib) and climbed up from there. After the price reached 2980 again, it did not drop below the 26 day moving average again (only tested it on Aug 22) until the september all time high of $4980 was reached. After that, it dropped below the 26 day MA in 72 hours which was critical and signalled the downtrend to the .382 fib (after a bounce stage). Same thing happened in the bullish cycles before this one.
This 26 day moving average is currently at 6370. If history repeats itself, a further drop to 5K'ish is bound to happen if that level is broken tomorrow.
Seeing as how easily people jumped on the BCH bandwagon today, how many alts are near bottom supports and are approaching the end of long term wedges, seeing how many people are already anticipating a correction and how fast it fell from all time high in previous cycles, I can't see much upward momentum for BTC anytime soon.
lacrown
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@AndersF, Thanks your analysis is insightful and helpful.
@MarcPMarkets thank you, this is in accordance with @goldbug1 analysis, thank you both, have learned great deal from you!
I'll keep my calm and wait for 6100ish levels for start of adding to my position. In the longrun, 6400-6500 seemed a good price to add, but knowing the EW counts, seeing the support-resistance Fibonacci levels and price dancing around them, after Segwit2X out of the way and few ATH, BTC sholud retrace a little more sigbificantly. Hope I'm right and we will see that 6100ish level.
Many times I have seen price slightly touching Fib so I am setting my limits for buying little bit above.
MarcPMarkets
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@mk_trader, yeah he provides some excellent insight. He was talking about BCH weeks before it went nuts. Definitely one to follow.
dwk8081
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Great colour Marc. Any thoughts on ETH? Seems to be caught in a box range and was wondering if you see this breaking out of it current range (AUD$400 floor). Have a great week ahead.
MarcPMarkets
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@dwk8081, it is still stuck in the range. Unless you have some inside information, I have no idea when it will break out. I am waiting for a retest of the low part of the range, or a breakout before I report anything on that market.
On September 5th, we dropped from all time high($4980 on Bittrex) back to $4001 in 4 days. That $4001 was a 37 day moving average. At this moment, that MA line is at $6086 - so that is on the table for the next 24 hours.
On June 15th, we dropped from an all time high of $2980 back to $2120 in 4 days. That $2120 was a 47 day moving average. At this moment, that MA line is at $5618.
By the way, in both these bullish periods (and the ones before that), the 26 moving average was not broken again after a the previous all time high was broken until the new all time high was reached. Let me give an example: after the June high of 2980 we dropped to 1830 (.382 fib) and climbed up from there. After the price reached 2980 again, it did not drop below the 26 day moving average again (only tested it on Aug 22) until the september all time high of $4980 was reached. After that, it dropped below the 26 day MA in 72 hours which was critical and signalled the downtrend to the .382 fib (after a bounce stage). Same thing happened in the bullish cycles before this one.
This 26 day moving average is currently at 6370. If history repeats itself, a further drop to 5K'ish is bound to happen if that level is broken tomorrow.
Seeing as how easily people jumped on the BCH bandwagon today, how many alts are near bottom supports and are approaching the end of long term wedges, seeing how many people are already anticipating a correction and how fast it fell from all time high in previous cycles, I can't see much upward momentum for BTC anytime soon.