WYCKOFF'S DISTRIBUTION #1: Are Bears Strong Enough?Hello everyone!
In this analysis, I present the Wyckoff's theory regarding the distribution phase, some other indicators reinforcing it and why I believe Bitcoin is losing power right now. It looks like Bitcoin is perfectly following every single step of it and any trader should be cautious about it.
* If you are not familiar with Wyckoff's theory, you can take a look at this image and use it as a comparison: i.redd.it
As shown in the chart above, so far, we've completed phases A, B and C with its respective events. The run to the ATH may have set the top for a while, indicated by the UTAD, being the last strong move of the trend. According to the theory, we should expect a down trend from now on, going thourgh phases D and E in the following days. The relevant levels to watch and a key factor are presented below, according to some other analyses:
• Elliott wave :
We could draw an Elliott wave starting at the Bitcoin's bottom @ ~3000 USD. In this case, we have potentially just completed wave 3 after a 1500% gain and the price would now start to correct in wave 4. This comes as a confluence with the distribution theory.
Trying to find targets for this move, we could use the Fibonacci retracement. Elliott's theory says we should expect wave 4 to retrace no more than 38.2% of wave 3. So I believe the lowest level Bitcoin could go to during this correction/distribution would be around 22k and that's huge! It would mean a 65% correction . However, that level is not guaranteed, as the price could retrace much less than that, maybe to 33k, where we have another Fibo level or even any other support we may found during this down trend. Anyway, it will be a very nice opportunity to reaccumulate Bitcoin at lower prices, aiming for the following wave 5 in the future.
If this is correct, some patience may be needed. According to Elliott's theory, wave 4 can take some time to be developed. I'm expecting it to be similar to wave 2, so we would have several weeks of down trend ahead.
• Trading Psychology :
If you are a crypto enthusiast, you may recognize everyone is still very bullish about Bitcoin and influencers are yelling BUY THE DIP at pretty much every single red candle we have on the daily chart. That's dangerous! Let's take a look at a common argument they have: the 50 day moving average.
Overbullish people tend to say buying when the price touches this line is a good buy . Well, it is untill it turns to a good bye ! Take a look at the current situation below. The 50MA is represented by the green line. We are at this level once again and many people are buying.
However, take a look now at 2017's top. A similar situation happened and I'm sure many people have bought and got rekt right there!
"Be cautious and fearfull when others are greed." Remember very few people have sold the top in 2017, most of them were expecting higher highs. The top must come someday, and it's usually when no one is expecting...
>Now, the bullrun may not be over yet. We might see a double top's run similar to 2013. Also, thats what the Elliot wave shown above tells us. The current correction should correspond to wave 4. There's still a great run for wave 5 in the future.
>> Many other bearish indicators show us we should expect the market to move downwards in the short term. I'll avoid extending this analysis for too long, so there is a link below to one of my previous ideas which I present several bearish indicators in confluence with the current scenario, such as the multiple divergences, Pi Cycle's top and chart patterns. Make sure to check it out!
** This analysis would be invalidated if we end up crossing the ATH once again. It is still a very good risk/reward situation we have here.
At this point, it would be very ignorant not to consider all of this.
Feel free to share your thoughts in the comment section below.
Safe tradings, everyone!
