Keep in mind in markets where emotion runs to extremes, levels are going to be far from precise. The 6030 level was the area where I was looking for a retrace to begin the B Wave counter correction, but price went to 5400 instead. This is not logic driving these markets when prices extend that far that fast and then reverse.
More importantly, if the current candle closes with a long tail, it will establish a . These are reversal candles and when they appear on a large time frame (4 hour and above) they carry a lot of weight. A break of 6469 will signal momentum and most likely the beginning of the B Wave.
I have written previously that these are tricky waves because they often fool investors into thinking it is the next leg to a new high. If the B Wave unfolds, it is possible for price to retest the 6950 to 7350 zone which is the .618 resistance of the current swing. How is this information helpful?
For one, if price breaks above the 6569 high, this market is likely in retrace mode so that means if you have been shorting, you should stop until the next resistance is reached. Possibly lock in more profit (if you are short from the 7ks) and cut losses if you shorted the lows. Also there will be many day trade opportunities on the long side if the market manages to work its way back up to the low 7ks.
Why not go long for a swing trade? The reason is the coming bounce (IF it unfolds) is less likely to reach the low 7ks. In the face of such momentum, it may only go to the .382 resistance at the 6350 area and then continue lower. This price action does not favor swing trade longs. And again this is where smaller time frame strategies like day trading solve that problem because the trade is open for a much smaller period of time. Things change way too fast in this market to be taking low probability trades especially when more time in the market is involved.
It is possible for the B Wave to be a small retrace that does not get beyond the .382, either way, the next wave which is the C Wave can take this market to the high 4ks. There is a .618 at the 4789 area which is relative to the recent swing originating from the 2980 low. It is just under the broader support in the 4950 area that I have written about in previous reports. A failed high (B Wave) can lead to these levels in the next week or two if this correction persists.
IF price manages to retest the high 4ks, that would be an area to watch for some form of stability. Such as a that takes a number of days to form. This is the area where I would be interested in buying for a broader move back up if the right structure presents itself. That is my plan.
Also now that BCH is in play, (and much stronger in terms of fundamentals) BTC may not be worth holding for the long term anymore. It appears BCH is attracting all the investors. That is a risk that we all face with these coins because technology evolves so fast, a coin can become obsolete relatively quickly. And this is why TA is so valuable, it provides signs that can prepare you for what is more likely to happen next, just like the top of this sell off. News is only a catalyst.
In summary, this market is in position for a retest of newly projected resistance levels which offers day trade opportunities on the long side in my opinion, no swing trades. If price establishes a lower high in the coming week, it is likely to retest the 5400 low and possible push into the higher 4ks before finding a more stable support to build a base upon. For those who short, 6350 and 6950 are the levels to watch. Other than that I am staying flat and waiting for the market to offer a more attractive reward/risk situation.
Comments and questions welcome.
CME group has announced BTC futures derivative to be launched later this year. Next ETFs are in the pipeline. This can only be good for BTC - having institutions now able to get BTC action. Though, some may say that the futures will be cash settled and this should not affect the price of bitcoin. Arbitrage will be the link that ties the futures to the price of BTC.
if nothing it will drive awareness and more people may want to own the real thing. I don't see this happening for BCH at the moment - not sure what that says.
I'm somewhat new to technical analysis, but I believe we can look at the previous two cycles to give us a rough guide of where we're going. The previous two times prices never went below .5 retrace during wave A and bounced back to a bullish run once .618 was reached in wave C. Right now I'm watching to see if a double bottom forms on the smaller time frame. If it does, I'm expecting the price to climb back to between .618 and .786 retrace of wave A to around ~$7200 and form wave B. Unless we're in a correction of the larger cycle starting ~$1,000 to $7,900, I do believe we will have to retrace from this area up before heading back down to the ~.618 area.
Just what I'm looking for right now -- would love to know what you think.