BTCUSD Perspective And Levels: Converging Trendlines?

BITFINEX:BTCUSD   Bitcoin / Dollar
BTCUSD Update: New highs but on below average volume as it attempts to break out of the fake out zone at 6410. This new high and failure to sell off below the 6k level makes the alternate wave count that I have been writing about clear. What makes this new high suspect is the volume .

If you notice, what has been happening in recent price action is a volume spike occurs on the initial leg of the move, and it dramatically declines as price attempts to follow through, like in this case, to a new high. This type of behavior has been followed by a reversal of momentum which makes the current level very risky for new longs.

On top of that, price is attempting to push the upper boundary of what I like to call the fake out zone. This is a projected zone that is based on the range of the previous swing high of 6151 to the low of 5365. There is no guarantee that price will fail, but if it does, it is most likely to happen within this zone. Combine that with the below average volume situation, and you can get a better sense of what this market is likely to do in the next couple of days at least.

Even though the alternate wave count appears to be in play, it is now possible to draw convergent trend lines on the highs and lows of this price structure. This rising wedge formation implies shallow pullbacks and slightly higher highs in the near term, but longer term this is bearish . Once 5 waves are complete within this structure, a serious correction is likely. Based on a measurement and projecting from the 5632 low, this market can go as high as the 6700s (which is the 1.618 extension from current swing low) before the major correction possibly unfolds. These type of formations commonly appear in Wave 5.

One thing that I have to mention about Elliott Wave is that like anything else in TA, it is not 100% accurate. Nothing is. When the market negates a wave count, you have to adjust to the new market information and relabel the formations. This is why it is important to understand and use multiple elements like support and resistance , candle sticks and chart formations to provide guidance as well. (This is especially helpful when markets change fast like this one).

So what is the best way to play this market? Day trading offers the best reward/risk in my opinion because it allows you to participate in very short term moves, along with low risk stops and helps you avoid any major adverse movements. It also allows you to trade with a lot more flexibility because the movements on that time frame are proportionally large in either direction. It is not easy though because you must be nimble. Day trading requires a ton of attention, and a very well defined plan. Like I wrote before, if you do not have a process that provides guidance for your decision making, then do not trade at all, especially do not day trade.

In summary, the current price action has made for a clearer wave count which is bullish , but also offers perspective on how much longer this momentum can persist before a more serious correction. At the moment, this formation may conveniently line up with the Segwit2X coming up in a few weeks. The best strategies to employ in this environment in my opinion are ultra short term, and if you are sitting on some coins with a nice profit, remember it never hurts to lock some in. These type of rising wedge formations often lead to much more dramatic market reversals, and until that is out of the way, I do not plan on taking any swing trades in this market.

Comments and questions welcome.

Marc Principato, CMT |Author: Analyze Any Financial Market Like The Pros Using Price Action| | Cofounder (S.C.)

"So what is the best way to play this market? Day trading offers the best reward/risk in my opinion because it allows you to participate in very short term move" Couldn't agree more, you do not want a black SWAN event to crush your stack! Great article Marc!
@MarcPMarkets Hey Mark, i'm not a very skilled trader, but I have made some nice profits be rational decisions. Anyway: I'm very invested in OmiseGo right now, the 14th coin if you're looking at market cap. I bought at 7.5 dollars, after doing some TA, to come to the decision it was a good investment. Because of the bitcoin rise it went down to 6.5 something.
Should I cut my losses. Or wait it out?
Do you think the BTC correction will fuel the alts, or tank them even more.
Thx in advance
@N0S41NT, I cant answer that. It really all depends on your original intent. When you bought it, was it as an investment? Or were you trying to make a quick profit? I think that coin has generally good fundamentals so as a long term investment, I believe it is not a bad idea to have some. You must decide what you are comfortable with. I believe once the BTC rise turns the alts will get a boost. This skew is being fueled by the fork in my opinion.
+1 Antworten
N0S41NT MarcPMarkets
@MarcPMarkets, Thanks!
Good analysis. Love the great description on your thinking.
MarcPMarkets SecondMouse
@SecondMouse, thank you and that is why I put so much effort into that. Forecasting this market is a tough, and I want the community to at least learn something if they can't participate.
Great article Marc!! Couldn't agree more! If your not a daytrader you should be patient!
+1 Antworten
@goldbug1, hehe glad we are on the same page.
Thankyou for sharing !! *google: "fake out zone" *
Benjamix Benjamix
Maybe the smart money has all but left and we're dealing with the old holders. Small volumes making lots of noise. Scarcity squeezing the shorts off.

"Give me some of that newly minted B2X and let's see what happens with the listing in the biggest exchange in the world... Maybe then we'll talk fiat.." they say ...

lol... Good luck!!
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