XRPUSD - Long term elliott wave update. Bears broke the channel!
Updated
A quick aside... as complicated and nuanced as Elliott wave may seem, and while there are many "guidelines" within the theory, there are really only 3 hard and fast rules to it:
Rule 1: Wave 2 cannot retrace more than 100% of Wave 1.
Rule 2: Wave 3 can never be the shortest of the three impulse waves.
Rule 3: Wave 4 can never overlap Wave 1.
If any TA's have labels that violate any one of these rules, then it is wrong, period. Elliott Wave guidelines can be broken/bent, rules cannot.
Back to the analysis...
No change to the long term Elliott wave count because we have not broken any rules. Primary wave 2 can carry us all the way down to 99.9% retracement of the first wave and still be valid. That's right... we could go all the way down to near .006 before starting the next wave up.
Do I believe we will get there? No, but it is certainly possible and if it happens I will not alter my count. Note that after wave 2 finishes (at whatever price), THERE WILL BE A WAVE 3 RALLY WHICH WILL TAKE US HIGHER THAN $3.30. The only possibility I see that this doesn't happen, is if XRP fails as a currency and is shut down... pretty much the risk of any crypto-currency, right? If the possibility of this happening causes you to lose sleep each night, then I would humbly suggest you consider staying out of the crypto market. It is extremely risky!
The bears are in clear control and the last waves of selling have been intense across nearly all crypto-currencies. As painful as this is to take if you are a long term holder, it provides reinforcement that we are indeed in a wave 2.
Note the "character" of wave 2's:
Second Waves (Wave 2)
Second waves tend to retrace so much of Wave 1 that most of the profits gained are eroded. They tend to end on low volume and low volatility. In a bear market, this indicates a drying up of selling pressure. However, during Wave 2 most investors are convinced that the bear market is here to stay.
Does that pretty much sum up the sentiment of most investors right now? I think so.
One of the guidelines in Elliott is that 5 wave impulse patterns tend to form channels. The bears have broken the lower green channel on my chart. Unless quickly retraced, the channel is invalidated. Longer term, this means that the upchannel is forming a less steep angle. The upper channel is very steep (running through near $30 by August/September), so I don't think this is too surprising, and it has pretty much ruled out the alternate count I was tracking (that we were in a lower degree wave 4). Price movement reveals clarity about the pattern. This in turn eliminates possibilities, and is extremely valuable for future trading.
Where will wave 2 end? Elliott wave can't help much (since wave 2's can retrace up to 99.9%), but there is some support at the previous high of 39.887 (Bitstamp). Fibonacci retracement level of 88.6% is very near there (between .38 - .39), which gives us some reinforcement of that area.
The market is extremely oversold, but some of the nastiest falls happen when it is in this state. I will be watching the character, wave counts, and indicators on short term bounces to see if they give indications that wave 2 is over and that wave 3 (up) has begun.
Be safe out there.
Rule 1: Wave 2 cannot retrace more than 100% of Wave 1.
Rule 2: Wave 3 can never be the shortest of the three impulse waves.
Rule 3: Wave 4 can never overlap Wave 1.
If any TA's have labels that violate any one of these rules, then it is wrong, period. Elliott Wave guidelines can be broken/bent, rules cannot.
Back to the analysis...
No change to the long term Elliott wave count because we have not broken any rules. Primary wave 2 can carry us all the way down to 99.9% retracement of the first wave and still be valid. That's right... we could go all the way down to near .006 before starting the next wave up.
Do I believe we will get there? No, but it is certainly possible and if it happens I will not alter my count. Note that after wave 2 finishes (at whatever price), THERE WILL BE A WAVE 3 RALLY WHICH WILL TAKE US HIGHER THAN $3.30. The only possibility I see that this doesn't happen, is if XRP fails as a currency and is shut down... pretty much the risk of any crypto-currency, right? If the possibility of this happening causes you to lose sleep each night, then I would humbly suggest you consider staying out of the crypto market. It is extremely risky!
The bears are in clear control and the last waves of selling have been intense across nearly all crypto-currencies. As painful as this is to take if you are a long term holder, it provides reinforcement that we are indeed in a wave 2.
Note the "character" of wave 2's:
Second Waves (Wave 2)
Second waves tend to retrace so much of Wave 1 that most of the profits gained are eroded. They tend to end on low volume and low volatility. In a bear market, this indicates a drying up of selling pressure. However, during Wave 2 most investors are convinced that the bear market is here to stay.
Does that pretty much sum up the sentiment of most investors right now? I think so.
One of the guidelines in Elliott is that 5 wave impulse patterns tend to form channels. The bears have broken the lower green channel on my chart. Unless quickly retraced, the channel is invalidated. Longer term, this means that the upchannel is forming a less steep angle. The upper channel is very steep (running through near $30 by August/September), so I don't think this is too surprising, and it has pretty much ruled out the alternate count I was tracking (that we were in a lower degree wave 4). Price movement reveals clarity about the pattern. This in turn eliminates possibilities, and is extremely valuable for future trading.
Where will wave 2 end? Elliott wave can't help much (since wave 2's can retrace up to 99.9%), but there is some support at the previous high of 39.887 (Bitstamp). Fibonacci retracement level of 88.6% is very near there (between .38 - .39), which gives us some reinforcement of that area.
The market is extremely oversold, but some of the nastiest falls happen when it is in this state. I will be watching the character, wave counts, and indicators on short term bounces to see if they give indications that wave 2 is over and that wave 3 (up) has begun.
Be safe out there.
Note
XRPUSD has been rallying along with the rest of crypto since the beginning of April. Volume is strong, and price over the last 48 hours has broken through 50 and 200 EMA daily moving averages. More importantly, from an Elliott wave perspective, the move up from the recent lows has an impulsive, 5 wave look so far. Very positive developments that lend evidence to the possibility that wave 2 has ended and wave 3 has begun.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.