BTCUSD Update: New all time highs, which should not be a surprise. The question is: Is the current retrace a minor one? Or does it have room to test lower supports? Elliott Wave provides some interesting perspective to help answer these questions.
First I want to mention ETH for a moment. I was debating whether I should write up another ETH report, or BTC, or even ETHBTC which one trader suggested (I took a look at it). I chose BTCUSD not because it is wowing the media and the markets, but because I want to point out there is a relative strength relationship compared to ETH. If this was inverse as some suggest (investors selling BTC and buying ETH with their profits) then ETH should be testing resistance, not supports while BTC retraces. I have been writing about ETH weakness concerns while BTC has been pushing highs for days now.
Let's talk about BTC which is the leader, and the base currency of this market in my opinion. 4190 is the new all time high, which I am sure is being spread everywhere by the mainstream and non main stream media like wild fire (I haven't looked at any articles yet, but I can only imagine). I'm sure they will be predicting BTC 5k is just around the corner! Please do not get sucked into this hype.
Observing this market from the Elliott Wave perspective, we have been in a subdegree Wave 3 of a broader 5. Within this subdegree 3, 5 minor waves can be counted which signals completion. To add to the argument, I measured the subdegree Wave 1 to the bottom of 2 with the extension tool, (it is not on the chart for simplicity sake) and there is a 1.618 extension around the 4112 area. This is very significant because this is a common Wave 3 completion point relative to the degree being measured. According to the same measurement, the next completion point is around 5164. A push up to the high 4000s or the low 5000s would be a proportional target for a large degree Wave 5 to complete.I would not get overly excited until the next corrective wave is in place and that is what I want to highlight in this evaluation.
To answer the question: Is this pullback minor? Or is there more too it. Based on the wave count, this is most likely the beginning of a Wave 4 of 5 that can retest levels as low as 3500 before going higher. To help confirm this scenario, the 3820 support (.382 of current bull swing) must be taken out followed by other bearish structure like a failed high. If 3820 is not broken, then Wave 3 of 5 is still unfolding and this market is more likely to retest the high.
In summary, this market is clearly strong and has all the structure to reasonably expect higher prices. That can change quickly and there are levels in place that would signal a broader retracement is in play. I am keeping a close eye on 3820 because a break below opens the door to the possibility of retesting the 3530 support area which would be a very attractive buy price in terms of structure. And I can use this information to help time my entry into other markets like ETH.
Thanks Marc! I'm a novice at technical analysis. Your write-ups are great in putting things into perspective (learning what Elliot Wave Theory is, etc). Definitely not an "inverse" it seems as you said. You would think those that capitalised on BTC gains will shift to the alt coins and ETH (more value at the moment), but not happening yet. There's some weakness so far for ETH, though still has breakout potential though. $350-380 still within grasp, push for new high!!!
MarcPMarkets
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@kennyshih, you're welcome. Yeah the concept of relative strength (which means if the leader makes new highs, strong markets like ETH should follow) which can also be expressed as a correlation is not present but it was previously. Or these altcoins are internally weak and when BTC has a serious pull back, they will feel it more. We will have to see.
dalmazio
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@MarcPMarkets, I've been studying this chart and a few others, and you were spot on regarding being at the start of wave 4 and retesting 3500 before going higher. And if this is still accurate, and we've just finished wave 5, then we might be looking at a VERY steep correction down to wave 4 territory of the larger degree wave. But that would send us down to $2000 which represents a 60% correction from ATH! That's what Elliot Wave Theory suggests, but it seems rather large. Thoughts?
Smokwawelski
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cryptofan07
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Retrace would be appropriate for Bitcoin to stay within realistic frame
cryptofan07
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Bitcoin blow up is hardly due to mathematical analysis and thats why its difficult to predict its play. Its not a problem with math but data analized. Bitcoin went public and after seccessful upgrade news and business run after it. So Bitcoin is full of surprise And its puzzling is it continue the conquest or goes to a minor correction.
MarcPMarkets
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@cryptofan07, no market moves because of mathematical analysis. The mathematical analysis only attempts to measure and compare so that it is possible to anticipate the next move with some degree of accuracy. I'm not predicting, I am measuring. Markets move because participants are motivated to place orders to buy or sell. I may not know what is motivating them, but these actions express themselves in patterns over and over again. That is all I'm looking for.
SellzCarz
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Excellent write-up and well timed. FOMO versus patience.