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.
Last waves almost have no retraces.
I'm sure, that's because we have too much home made margin shorters, while pro traders and investors significantly closed their positions.
They see great oportunity of getting reach in minutes by shorting high they see. 100x leverage, 50-100-pips SL/TP.
They are adding new money into market by loosing them in bad trades.
@cellchaos, sorry I'm quite new to trading. What do you mean by "retraces", almost like bouncing a ball?
Thanks for your input!
cellchaos
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@SecondMouse, sorry, I mean retracemenets. Each time we hit ATH market get some fever because of high uncirtainity. Compare last movement to highs of 13-23 october.
Last one looks too clear when most of oracles expect significant correction.
Lots of traders stuck on watching this growing green dildo and manually was trying minimize loses by catching each little retracement.
cellchaos
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I mean those who was trying to short it.
Regular traders and investors are waiting patiently for significant correction. Nobody wants to buy at the high.
But shorters ought to do this. And that's pushing price up.
MarcPMarkets
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@cellchaos, great explanation and thanks for sharing. I agree there are too many shorts that are treating this market like a traditional market. Sure it will correct, but you can't just get short simply because it feels too high.
MarcPMarkets
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@SecondMouse, retrace means pullback, or correction.
MarcPMarkets
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@cellchaos, right. If you are day trading I can see getting away with it, but if you get caught in this, its not pleasant.
cellchaos
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@MarcPMarkets, I'm going long right now. Sellout looks controlled. It's should be very low-risk entry point for daily trade.
cellchaos
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But I feel it will be the best entry point for next week. The only problem - targets aren't accurate on the moon. As we are on the territory of logarithmic scales. Uncontrolled sellout can start again everywhere. Maybe near 7850?
Anyway, will be closing positions using trailing-TP.
I'm sure, that's because we have too much home made margin shorters, while pro traders and investors significantly closed their positions.
They see great oportunity of getting reach in minutes by shorting high they see. 100x leverage, 50-100-pips SL/TP.
They are adding new money into market by loosing them in bad trades.