ETHUSD Update: Larger than expected retrace alters wave count and offers good lessons about price action and trade management. Outlook is still bullish as long as supports are maintained.
Wow, what a wild move. This is why I always remind everyone "anything can happen". In terms of wave counts, this move changes the structure because Wave 4's do not overlap the area of Wave 1's. If there is overlap then it is not a Wave 4, which has prompted me to relabel the waves. The large move up is relabeled as subdegree Wave 1 and the current retrace is subdegree wave 2 of the larger 5.
This is the subjectivity and imperfection of Elliott Wave, but then again nothing is perfect, especially in the markets. As price action traders we understand this and simply ADJUST. The market is always right, we are just trying our best to listen. There is no room for ego in this game.
Even though my original wave count (current move to 350 as subdegree Wave 3) was negated by the current retrace, it still manged to get me into a very good trade. I sold half of my position at 345 as reported yesterday and I was stopped out for the other half at 306 for a 12 point profit. I was willing give back some profit for the chance to participate in the broader move. Like one of my former mentors used to say, "Sometimes you get the elevator, and sometimes you get the shaft."
The question now is where to from here? My adjusted wave count places this market in a subdegree Wave 2. Which is good and bad. It's good because it can be setting up for another subdegree Wave 3 which can take us to the 380 resistance that I have been writing about. It's bad because corrective waves usually unfold in 3's and at the moment there is only one leg in place. Which means the minor resistance in the 324 to 334 area is likely to lead to range bound price action with support at the 290 to 295 area.
The 279 and 263 supports are the main structures that keep this entire formation bullish. As long as they hold, I will be looking for ways to get long. The 334 and 350 resistances need to be taken out in order to signal the new subdegree Wave 3 is in play and again it is all a matter of time or catalyst.
In order for me to buy back into this market, I need to see some form of reversal structure like a higher low or double bottom on this time frame. And it needs to occur within the 290 to 334 range.
In summary, we must always maintain flexibility and an open mind. Financial markets possess an element of randomness and this is why nothing is ever 100%. We listen, and as the market provides new information, we adjust. Elliott Wave may be imperfect, BUT it kept me on the right side of the market and that is really all that matters. Current structure puts this market back into a subdegree Wave 2, which means there is still potential to reach the 380 resistance area in the next leg up, BUT two more corrective legs are likely to unfold first. Trading effectively is not about being "right" it's about managing risk in the face of constant uncertainty.
On the 5 min chart I am observing what appears to be a rising wedge from the 290 rebound. Also, on Poloniex, there was a decent resistance wall at 320, which has now been moved to 330. The possible rising wedge seems to terminate at the 320 area.
At the same time, there is a 20(30?)% reduction in mining rewards coming tomorrow, and Monero as well as BCH stealing the spotlight.
What do you make of these observations?
Regards, J
guppy_
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@janski, a reduction in the mining reward will reduce inflation and thus, *should* contribute to a price increase.
MarcPMarkets
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@guppy_, in the long term, but short term it may have a negative effect because there will be less network support.
MarcPMarkets
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@janski, I would be very careful using a 5 minute time frame. Also I do not go by any exchange activity, it is too noisey. There are a lot of moving parts, and it seems that there is a "sector rotation" effect, meaning money flows in and out very selectively. Competing coins may steal the spot light, so for me it is all about maintaining supports and waiting for the next catalyst. Price action will let me know what this market wants to do either way.
takecare14
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love the analysis
Matte56
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Very well written. Appreciate the time you put in and the effort you made.
ahnh
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Thank you MarcP. It was surprising retrace.
MarcPMarkets
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@ahnh, hehe they happen. That's why I don't get carried away and stick to my targets. You're welcome.
dimisus
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Thanks for your time.
MarcPMarkets
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@dimisus, you're welcome. I'm glad you find my analysis helpful.
At the same time, there is a 20(30?)% reduction in mining rewards coming tomorrow, and Monero as well as BCH stealing the spotlight.
What do you make of these observations?
Regards, J