BITCOIN’S MEGAPHONE TOP - WILL IT OFFER A GET OUT OF JAIL CARD?Background - Bitcoin has limited price history and earlier moves are so volatile and spiky that it makes it very hard to do usual technical analysis. However from my historical charts you will see that I noted Nov 2013 as major wave 3 and was expecting wave 5 to develop from Jan 2015.
Yet the price progression and the actual development of pattern call that into question and caused me to wonder if Nov 2013 high was actually the major wave 5 top. Consequently, I assumed that the bounce of the 2015 low was a retracement bounce. That might still be the case. Now that we have enough price history from that low to enable us to make a calculated guess of what this might indicate regarding future price path.
So here are the 2 possible scenarios (both indicating price weakness in the short term):
1. That the Nov 2013 was the major 5 wave top and that we have seen the bounce from Jan 2015 low as triple zigzag which upon completion will revert to downside in ongoing bear market since Nov 2013.
2. That Nov 2013 high was major wave 3 and the decline since into Jan 2015 low completed major wave 4 and since then we have developed a major wave 5 which instead of taking the usual form that of an impulsive move of 5-3-5-3-5, it has taken the form of 3-3-3-3-3 expanding ending diagonal (Megaphone) and if this proved to be the case then we have truncate wave 5 where the top fails to take out the price high of wave 3 (see detail of Truncated wave 5 in section 2.3 at my.elliottwave.com ) www.screencast.com
So it seems that we are in very late stage of that cycle which is likely to complete around $800 zone (see charts below). Or that we are completing 1st zigzag of intermediate wave V and could experience a pullback to $700 zone with final zigzag to follow leading into completion of this cycle (around $900 – see charts below) since Jan 2015 low.
Many have noted the rising wedge developing in the price action of Bitcoin and have attempted to draw this with variation covering different price zone and time frame. This confusion is further complicated when using Log Scale where it appear like rising wedge from the Jan 2015 low (or at best a rising channel) Vs Linear Scale showing a megaphone shaped pattern.
The important rising wedge to take note of is the one being formed from the low of 13th November 2016 and which is nearing completion with upside being capped around $800 on BitStamp.
Rising wedges in this position are topping pattern suggesting that we might have entire cycle from Jan 2015 low being completed or the one which started from 2nd August low. So even if this is not a full reversal (with final zigzag to follow) it suggests a pull back is due which could drop to around $680 -$700 area.
If this zone holds then we are likely to have one more minor zigzag to the upside to follow and which could end around $900 - $950 zone as a last get out of jail card for any longs to take protective action.
Series of charts below show the details.
Warning: This is my interpretation of price action using TA approach that I consider helps me the most but could be completely wrong. Therefore as always, do your own analysis for your trade requirement and ignore my views.
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Thank you for taking the time to read my analysis.
DanV
