Two possible paths
For most of my long term BTC views I best refer to my earlier posts, as not much has changed in my overall view. I still have the chart below as my primary count until it is invalidated.
So, instead of repeating the logic behind this chart, let's see how it could get invalidated. Most promising action leading to an invalidation (at least of the 1 count of the C leg) could actually take place (early) this week. For the pattern above to remain valid we would need to continue on down and there is a chance we might break up. Maybe even by a considerable amount. For that, let's take a look at the 12hr chart.
Of course, at first this looks like a confirmation of a further move down, and to be fair, it very well could be. Admittedly the bounce was a bit higher than I anticipated (I was expecting 10K to provide more resistance) but it also came back down from that bounce in no time. No matter, I maintain a target between 9K and the low 8s. However, if we zoom out a bit we see something that provides hopium.
With some imagination some people see a Cup & Handle (C&H) pattern (Xi pump till recent 10.5) but a C&H is a bullish continuation pattern and since the bottom of the cup is below the lead up to the cup, I consider that to be unlikely. A pattern in itself does not provide any guarantees regarding continuation anyways, it simply provides a target for the breakout. That target is tempting, as it would be 14K, which is a double top with the 2019 high. However, I do not think there is that much demand in the market at the moment, not even with the upcoming 'halving'. It is definitely not impossible and there definitely is a lot of logic behind it. So, was that the hopium? No. In fact the most promising feature on the chart is the blue S/R line around 9550 (depending on exchange). If that critical support holds, I do see a breakout of the broadening wedge as drawn on the chart above. The breakout target for that would be around 10.6 to 10.8 (give or take a few bucks).
I tried to convey that logic in this split view. On the left I changed my count from a completed 1 wave to a yet to complete 1 wave, including the logical target. On the right I have tried to show the logic on the 3D chart for those levels. They also happen to be the 1.272 extension of wave 4, if that turns out to be the count. I have to admit that wave 5 can always run wild, so these S/R levels, nor the 1.272 fib extension, form any kind of 'insurmountable obstacle' that would prevent reaching the targets that a C&H extension would give. How BTC responds if (!) we get to those levels is however quite relevant for any possible continuation target. Now, if we are not in a C&H but we do have one more leg up, I still expect a correction and I still expect us to complete the pattern as pointed out in the first chart, just with a relatively small upwards adjustment to the level of the 1 and the 2. It might even cause me to rethink the ultimate target of the C leg, but not by much and definitely not yet. Lastly, I want to remark that despite all this sounding like I am bearish, in fact I am hoping we continue correcting now, so we can complete a pattern I do see as valid according to Bullkowski as well as confirmed in the volume profile... Well, mostly. The inverse H&S, which is a typical reversal pattern and who's target is close to the target for 2020 from the first chart. Now, I don't love H&S patterns and inverted ones even less. But even if you look at it as a spring (Wyckoff) of a wave 2 correction (Elliott Waves) or just a normal market oscillation, it makes sense to me.
Green and red lines are S/R areas to take into account. Next time I will use more Trading Ranges to make clearer how to gauge where price really is in relation to previous movements. Last point of attention is the dawning of a possible (temporary) retreat on the legacy markets and the impact on BTC and crypto in general. I hear a lot of bullish talk about how money will flow out of stocks and into crypto. Well, we haven't been through a recession with crypto yet but as a rule of thumb money doesn't tend to flow to speculative assets during a recession. And despite many believing the opposite, it doesn't flow straight into gold & silver either. People tend to 'store' money in intangible (not-taxable might be a better term) assets like high end art, supercars, etc. It seems counterintuitive but if (most of) your money is not generating more money, best not to risk it (or part of it) and best not to put it where it can be taxed... As always: trade responsibly and don't over-leverage. Until next week.
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